PROJECT:Logistics & Supply chain industry in India: current status

SU !ITTE" #:
Chandra pra$ash Singh% ROLL &O: '( ! ) *+anage+ent science,-.//0-.//1

1. EXECUTIVE SUMMARY 3 2. BASIC CONCEPT OF SUPPLY CHAIN..4 3. LOGISTICS INDUSTRY STATUS IN INDIA.33
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4. 3PL SURVEY REPORT EXPLANATION...47 5. CHALLENGES OF SUPPLY CHAIN IN INDIA.52 6. WORLD BAN REPORT ON TACTS..5! 7. I.T IN LOGISTICS INDUSTRY.!" 8. REPORT I.T CRITICAL TO INDIA..!2 9. CUSTOM CLEARENCE PROCEDURE IN INDIA .!5 10. 11.
CONCLUSION!# BIBLIOGRAPHY..7"

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note :effort has been made to provide latest data and information from various sources and research institute ,and it is true to best of my knowledge. Thank you

Basic Concepts of Supply Chain Management

upply chains encompass the companies and the business activities

needed to design, make, deliver, and use a product or service. Businesses depend on their supply chains to provide them with what they need to survive and thrive. Every business fits into one or more supply chains and has a role to play in each of them. The pace of change and the uncertainty about how markets will evolve has made it increasingly important for companies to be aware of the supply chains they participate in and to understand the roles that they play. Those companies that learn how to build and participate in strong supply chains will have a substantial competitive advantage in their markets. CHA TE! "

Nothing Entirely New. . . Just a Significant Evolution

The practice of supply chain management is guided by some basic underlying concepts that have not changed much over the centuries. #everal hundred years ago, $apoleon made the remark, %An army marches on its stomach.& $apoleon was a master strategist and a skillful general and this remark shows that he clearly understood the importance of what we would now call an efficient supply chain. 'nless the soldiers are fed, the army cannot move. Along these same lines, there is another saying that goes,%Amateurs talk strategy and professionals talk logistics.& eople can discuss all sorts of grand strategies and dashing maneuvers but none of that will be possible without first figuring out how to meet the day(to(day demands of providing an army with fuel, spare parts, food, shelter, and ammunition. )t is the seemingly mundane activities of the *uartermaster and the supply sergeants that often determine an army+s success. This has many analogies in business. The term %supply chain management& arose in the late ",-.s and came into widespread use in the ",,.s. rior to that time, businesses used terms such as %logistics& and %operations management& instead. #ome definitions of a supply chain are offered below/ 0 %A supply chain is the alignment of firms that bring products or services to market.&1from 2ambert, #tock, and Ellram in their book Fundamentals of Logistics Management 32ambert, 4ouglas 5., 6ames !. #tock, and 2isa 5. Ellram, ",,-, Fundamentals of Logistics Management, Boston, 5A/ )rwin75c8raw(Hill, Chapter "9: 0 %A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer re*uest. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves.&1 5

from Chopra and 5eindl in their book Supply

Chain Management: Strategy, Planning, and Operations 3Chopra, #unil, and eter 5eindl, ;..", Supply Chain Management: Strategy, Planning, and Operations , 'pper #addle !iver, $6/ rentice(Hall, )nc. Chapter ":. 0 %A supply chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers.&1from 8aneshan and Harrison at enn #tate 'niversity in their article An Introduction to Supply Chain Management published at http/77silmaril.smeal.psu.edu7supply<chain<intro.html 38aneshan, !am, and Terry . Harrison, ",,=,%An )ntroduction to #upply Chain 5anagement,& 4epartment of 5anagement #ciences and )nformation #ystems, >.> Beam Business Building, enn #tate 'niversity, 'niversity ark, A:. )f this is what a supply chain is then we can define supply chain management as the things we do to influence the behavior of the supply chain and get the results we want. #ome definitions of supply chain management are/ 0 %The systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long(term performance of the individual companies and the supply chain as a whole.&1from 5ent?er, 4e@itt, 4eebler, 5in, $iA, #mith, and Bacharia in their article Defining Supply Chain Management in the ournal of !usiness Logistics 35ent?er, 6ohn T.,@illiam 4e@itt, 6ames #. Ceebler, #oonhong 5in, $ancy @. $iA, Carlo 4. #mith, and Bach 8. Bacharia, ;..", %4efining #upply Chain 5anagement,& ournal of !usiness Logistics,Dol. ;;, $o. ;, p. "-:.

0 %#upply chain management is the coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best miA of responsiveness and efficiency for the market being served.&1my own words. !

There is a difference between the concept of supply chain management and the traditional concept of logistics. 2ogistics typically refers to activities that occur within the boundaries of a single organi?ation and supply chains refer to networks of companies that work together and coordinate their actions to deliver a product to market. Also traditional logistics focuses its attention on activities such as procurement, distribution, maintenance, and inventory management. #upply chain management acknowledges all of traditional logistics and also includes activities such as marketing, new product development, finance, and customer service. )n the wider view of supply chain thinking, these additional activities are now seen as part of the work needed to fulfill customer re*uests. #upply chain management views the supply chain and the organi?ations in it as a single entity. )t brings a systems approach to understanding and managing the different activities needed to coordinate the flow of products and services to best serve the ultimate customer. This systems approach provides the framework in which to best respond to business re*uirements that otherwise would seem to be in conflict with each other. Taken individually, different supply chain re*uirements often have conflicting needs. Eor instance, the re*uirement of maintaining high levels of customer service calls for maintaining high levels of inventory, but then the re*uirement to operate efficiently calls for reducing inventory levels. )t is only when these re*uirements are seen together as parts of a larger picture that ways can be found to effectively balance their different demands. Effective supply chain management re*uires simultaneous improvements in both customer service levels and the internal operating efficiencies of the companies in the supply chain. Customer service at its most basic level means consistently high order fill rates, high on(time delivery rates, and a very low rate of products returned by customers for whatever reason. )nternal efficiency for organi?ations in a supply chain means that these organi?ations get an attractive rate of return on their investments in inventory and other assets and that they find ways to lower their operating and sales eApenses. There is a basic pattern to the practice of supply chain management. Each supply chain has its own uni*ue set of market demands and operating challenges and yet the issues remain essentially the same in every case. Companies in any supply chain must make decisions individually and collectively regarding their actions in five areas/ ". Production1@hat products does the market wantF How much of which products should be produced and by whenF This activity includes the creation of master production schedules that take into account plant capacities,workload balancing, *uality control, and e*uipment maintenance. ;. In"entory1@hat inventory should be stocked at each stage in a supply chainF How much inventory should be held as raw materials, semifinished, or finished goodsF The primary purpose of inventory is to act as a buffer against uncertainty in the supply

chain. However, holding inventory can be eApensive, so what are the optimal inventory levels and reorder pointsF >. Location1@here should facilities for production and inventory storage be locatedF @here are the most cost efficient locations for production and for storage of inventoryF #hould eAisting facilities be used or new ones builtF Gnce these decisions are made they determine the possible paths available for product to flow through for delivery to the final consumer. 9. #ransportation1How should inventory be moved from one supply chain location to anotherF Air freight and truck delivery are generally fast and reliable but they are eApensive. #hipping by sea or rail is much less eApensive but usually involves longer transit times and more uncertainty. This uncertainty must be compensated for by stocking higher levels of inventory. @hen is it better to use which mode of transportationF =. Information1How much data should be collected and how much information should be sharedF Timely and accurate information holds the promise of better coordination and better decision making. @ith good information, people can make effective decisions about what to produce and how much, about where to locate inventory and how best to transport it. The sum of these decisions will define the capabilities and effectiveness of a company+s supply chain. The things a company can do and the ways that it can compete in its markets are all very much dependent on the effectiveness of its supply chain. )f a company+s strategy is to serve a mass market and compete on the basis of price, it had better have a supply chain that is optimi?ed for low cost. )f a company+s strategy is to serve a market segment and compete on the basis of customer service and convenience, it had better have a supply chain optimi?ed for responsiveness. @ho a company is and what it can do is shaped by its supply chain and by the markets it serves.

How the Supply Chain Works

Two influential source books that define principles and practice of supply chain management are #he $oal 38oldratt, Eliyahu 5., ",-9, #he $oal, 8reat Barrington, 5A/ The $orth !iver ress ublishing Corporation:H and Supply Chain Management: Strategy, Planning, and Operation by #unil Chopra and eter 5eindl. #he $oal eAplores the

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I =. Airplanes are a very fast mode of transport and are very responsive. This is also the most eApensive mode and it is somewhat limited by the availability of appropriate airport facilities. J. %lectronic #ransport is the fastest mode of transport and it is very fleAible and cost efficient.However, it can only be used for movement of certain types of products such as electric energy, data, and products composed of data such as music, pictures, and teAt. #omeday technology that allows us to convert matter to energy and back to matter again may completely rewrite the theory and practice of supply chain management 3%beam me up, #cotty. . .&:. 8iven these different modes of transportation and the location of the facilities in a supply chain, managers need to design routes and networks for moving products. A route is the path through which products move and networks are composed of the collection of the paths and facilities connected by those paths. As a general rule, the higher the value of a product 3such as electronic components or pharmaceuticals:, the more its transport network should emphasi?e responsiveness and

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the lower the value of a product 3such as bulk commodities like grain or lumber:, the more its network should emphasi?e efficiency. )nformation )nformation is the basis upon which to make decisions regarding the other four supply chain drivers. )t is the connection between all of the activities and operations in a supply chain. To the eAtent that this connection is a strong one, 3i.e., the data is accurate, timely, and complete:, the companies in a supply chain will each be able to make good decisions for their own operations. This will also tend to maAimi?e the profitability of the supply chain as a whole. That is the way that stock markets or other free markets work and supply chains have many of the same dynamics as markets. )nformation is used for two purposes in any supply chain/ ". Coordinating daily acti"ities related to the functioning of the other four supply chain drivers/ productionH inventoryH locationH and transportation. The companies in a supply chain use available data on product supply and demand to decide on weekly production schedules, inventory levels, transportation routes, and stocking locations. ;. Forecasting and planning to anticipate and meet future demands. Available information is used to make tactical forecasts to guide the setting of monthly and *uarterly production schedules and timetables. )nformation is also used for strategic forecasts to guide decisions about whether to build new facilities, enter a new market, or eAit an eAisting market. @ithin an individual company the trade(off between responsiveness and efficiency involves weighing the benefits that good information can provide against the cost of ac*uiring that information. Abundant, accurate information can enable very efficient operating decisions and better forecasts but the cost of building and installing systems to deliver this information can be very high. @ithin the supply chain as a whole, the responsiveness versus efficiency trade(off that companies make is one of deciding how much information to share with the other companies and how much information

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to keep private. The more information about product supply, customer demand, market forecasts, and production schedules that companies share with each other, the more responsive everyone can be. Balancing this openness however, are the concerns that each company has about revealing information that could be used against it by a competitor.The potential costs associated with increased competition can hurt the profitability of a company.

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The Evolving Structure of Supply Chains

The participants in a supply chain are continuously making decisions that affect how they manage the five supply chain drivers. Each organi?ation tries to maAimi?e its performance in dealing with these drivers through a combination of outsourcing, partnering, and in(house eApertise. )n the fast(moving markets of our present economy a company usually will focus on what it considers to be its core competencies in supply chain management and outsource the rest. This was not always the case though. )n the slower moving mass markets of the industrial age it was common for successful companies to attempt to own much of their supply chain. That was known as vertical integration. The aim of vertical integration was to gain maAimum efficiency through economies of scale 3see EAhibit ".":. )n the first half of the ",..s Eord 5otor Company owned much of what it needed to feed its car factories. )t owned and operated iron

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mines that eAtracted iron ore, steel mills that turned the ore into steel products, plants that made component car parts, and assembly plants that turned out finished cars. )n addition, they owned farms where they grew flaA to make into linen car tops and forests that they logged and sawmills where they cut the timber into lumber for making wooden car parts. Eord+s famous !iver !ouge lant was a monument to vertical integration1iron ore went in at one end and cars came out at the other end. Henry Eord in his ",;J autobiography, #oday and #omorro&, boasted that his company could take in iron ore from the mine and put out a car -" hours later 3Eord, Henry, ",;J,#oday and #omorro&, ortland,G!/ roductivity ress, )nc.:. This was a profitable way of doing business in the more predictable, one(si?e(fits(all industrial economy that eAisted in the early ",..s. Eord and other businesses churned out mass amounts of basic products. But as the markets grew and customers became more particular about the kind of products they wanted, this model began to break down. )t could not be responsive enough or produce the variety of products that were being demanded. Eor instance, when Henry Eord was asked about the number of different colors a customer could re*uest, he said,%they can have any color they want as long as it+s black.& )n the ",;.s Eord+s market share was over =. percent but by the ",9.s it had fallen to below ;. percent. Eocusing on efficiency at the eApense of being responsive to customer desires was no longer a successful business model. 8lobali?ation, highly competitive markets, and the rapid pace of technological change are now driving the development of supply chains where multiple companies work together, each company focusing on the activities that it does best. 5ining companies focus on mining, timber companies focus on logging and making lumber, and manufacturing companies focus on different types of manufacturing from making component parts to doing final assembly. This way people in each com( pany can keep up with rapid rates of change and keep learning the new skills needed to compete in their particular business. @here companies once routinely ran their own warehouses or operated their own fleet of trucks, they now have to consider whether those operations are really a core competency or whether it is more cost effective to outsource those operations to other companies that make logistics the center of their business. To achieve high levels of operating efficiency and to keep up with continuing changes in technology, companies need to focus on their core competencies. )t re*uires this kind of focus to stay competitive. )nstead of vertical integration, companies now practice %virtual integration.& Companies find other companies who they can work with to perform the activities called for in their supply chains. How a company defines its core competencies and how it positions itself in the supply

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chains it serves is one of the most important decisions it can make.

Participants in the Supply Chain

)n its simplest form, a supply chain is composed of a company and the suppliers and customers of that company. This is the basic group of participants that creates a simple supply chain. EAtended supply chains contain three additional types of participants. Eirst there is the supplier+s supplier or the ultimate supplier at the beginning of an eAtended supply chain. Then there is the customer+s customer or ultimate customer at the end of an eAtended supply chain. Einally there is a whole category of companies who are service providers to other companies in the supply chain. These are companies who supply services in logistics, finance, marketing, and information technology. )n any given supply chain there is some combination of companies who perform different functions. There are companies that are producers, distributors or wholesalers, retailers, and companies or individuals who are the customers, the final consumers of a product. #upporting these companies there will be other companies that are service providers that provide a range of needed services. roducers roducers or manufacturers are organi?ations that make a product. This includes companies that are producers of raw materials and companies that are producers of finished goods. roducers of raw materials are organi?ations that mine for minerals, drill for oil and gas, and cut timber. )t also includes organi?ations that farm the land, raise animals, or catch seafood. roducers of finished goods use the raw materials and subassemblies made by other producers to create their products. roducers can create products that are intangible items such as music, entertainment, software, or designs. A product can also be a service such as mowing a lawn, cleaning an office, performing surgery, or teaching a skill. )n many instances the producers of tangible, industrial products are moving to areas of the world where labor is less costly. roducers in the developed world of $orth America, Europe, and parts of Asia are increasingly producers of intangible items and services.

Distributors
4istributors are companies that take inventory in bulk from producers and deliver a bundle of related product lines to customers. 4istributors are also known as wholesalers. They typically sell to other businesses and they sell products in larger *uantities than an individual consumer would usually buy. 4istributors buffer the producers from fluctuations in product demand by stocking inventory and doing much of the sales work to find and service customers. Eor the customer, distributors fulfill the %Time and lace& function1they deliver products when and where the customer wants them.

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A distributor is typically an organi?ation that takes ownership of significant inventories of products that they buy from producers and sell to consumers. )n addition to product promotion and sales, other functions the distributor performs are inventory management, warehouse operations, and product transportation as well as customer support and post(sales service. A distributor can also be an organi?ation that only brokers a product between the producer and the customer and never takes ownership of that product. This kind of distributor performs mainly the functions of product promotion and sales. )n both these cases, as the needs of customers evolve and the range of available products changes, the distributor is the agent that continually tracks customer needs and matches them with products available.

Retailers
!etailers stock inventory and sell in smaller *uantities to the general public. This organi?ation also closely tracks the preferences and demands of the customers that it sells to. )t advertises to its customers and often uses some combination of price, product selection, service, and convenience as the primary draw to attract customers for the products it sells. 4iscount department stores attract customers using price and wide product selection. 'pscale specialty stores offer a uni*ue line of products and high levels of service. East food restaurants use convenience and low prices as their draw.

Customers
Customers or consumers are any organi?ation that purchases and uses a product. A customer organi?ation may purchase a product in order to incorporate it into another product that they in turn sell to other customers. Gr a customer may be the final end user of a product who buys the product in order to consume it.

Service Providers
These are organi?ations that provide services to producers, distributors, retailers, and customers. #ervice providers have developed special eApertise and skills that focus on a particular activity needed by a supply chain. Because of this, they are able to perform these services more effectively and at a better price than producers, distributors, retailers, or consumers could do on their own. #ome common service providers in any supply chain are providers of transportation services and warehousing services. These are trucking companies and public warehouse companies and they are known as logistics providers. Einancial service providers deliver services such as making loans, doing credit analysis, and collecting on past due invoices. These are banks, credit rating companies, and collection agencies. #ome service providers deliver market research and advertising, while others provide product design, engineering services, legal services, and 22

management advice. #till other service providers offer information technology and data collection services. All these service providers are integrated to a greater or lesser degree into the ongoing operations of the producers, distributors, retailers, and consumers in the supply chain. #upply chains are composed of repeating sets of participants that fall into one or more of these categories. Gver time the needs of the supply chain as a whole remain fairly stable.@hat changes is the miA of participants in the supply chain and the roles that each participant plays. )n some supply chains, there are few service providers because the other participants perform these services on their own. )n other supply chains very efficient providers of speciali?ed services have evolved and the other participants outsource work to these service providers instead of doing it themselves. EAamples of supply chain structure are shown in EAhibit ".;.

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Aligning the Supply Chain with Business Strategy

A company+s supply chain is an integral part of its approach to the markets it serves. The supply chain needs to respond to market re*uirements and do so in a way that supports the company+s business strategy. The business strategy a company employs starts with the needs of the

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ESSENTIA S o! Supply Chain "ana#ement IN THE REA W$R % &C$NTIN'E%(

%Eor manufacturers we offer them the ability to drive standardi?ation with our customers. Through distributor rationali?ation, we partner with a few best(in(class distributors per category, which in turn offers them a significant increase in the business they get from our properties. And our customers now have access to a single(source, paperless process for purchasing all of their 5!G products. They outsource their purchasing operations and benefit from better economies of scale. Eor each constituent in our model, we provide high levels of data on purchasing activities, customer profiles, and seasonal patterns. @e are bringing transparency to the supply chain.& )n reflecting on the last couple of years, Charlie summari?ed the main lessons learned. %@e have to stay very focused on our core proposition. @e do purchasing of 5!G products and services for people who manage real estate. @e continue to build our value in that area. @e have learned how best to roll out the technology and how to integrate with our supplier partners. @e also have learned a lot about how to screen suppliers for their ability to implement our technology and how to support and assist our client to grow with us.& 2ooking at the neAt couple of years, Charlie sees the company continuing to grow its client base. %@e know we have an eAcellent procurement solution in place now. @e will continue to grow and enhance our facility management service offerings. @e will further integrate our systems with those of suppliers. @here there is real estate and a need to manage it, we have a solution and real estate leaders are starting to reali?e that.& customers that the company serves or will serve. 4epending on the needs of its customers, a company+s supply chain must deliver the appropriate miA of responsiveness and efficiency. A company whose supply chain allows it to more efficiently meet the needs of its customers will gain market share at the eApense of other companies in that market and also will be more profitable. Eor eAample, let+s consider two companies and the needs that their supply chains must respond to. The two companies are K(Eleven and #am+s Club, which is a part of @al(5art. The customers who shop at convenience stores like K(Eleven have a different set of needs and preferences from those who shop at a discount warehouse like #am+s Club. The K(Eleven customer is looking for convenience and not the lowest price. That customer is often in a hurry and prefers that the store be close by and have enough variety of products so that they can pick up small amounts of common household or food items that they need immediately. #am+s Club customers are looking for the lowest price. They are not in a hurry and are willing to drive some distance and buy large *uantities of limited numbers of items in order to get the lowest

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price possible. Clearly the supply chain for K(Eleven needs to emphasi?e responsiveness. That group of customers eApects convenience and will pay for it. Gn the other hand, the #am+s Club supply chain needs to focus tightly on efficiency. The #am+s Club customer is very price conscious and the supply chain needs to find every opportunity to reduce costs so that these savings can be passed on to the customers. Both of these companies+ supply chains are well aligned with their business strategies and because of this they are each successful in their markets. There are three steps to use in aligning your supply chain with your business strategy. The first step is to understand the markets that your company serves. The second step is to define the strengths or core
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)asic Concepts o! Supply Chain "ana#ement

competencies of your company and the role the company can or could play in serving its markets. The last step is to develop the needed supply chain capabilities to support the roles your company has chosen.

Understand the Markets Your Company Serves Begin by asking *uestions about your customers. @hat kind of customer does your company serveF @hat kind of customer does your customer sell toF @hat kind of supply chain is your company a part ofF The answers to these *uestions will tell you what supply chains your company serves and whether your supply chain needs to emphasi?e responsiveness or efficiency. Chopra and 5eindl have defined the following attributes that help to clarify re*uirements for the customers you serve. These attributes are/ 0 #he 'uantity of the product needed in each lot14o your customers want small amounts of products or will they buy large *uantitiesF A customer at a convenience store or a drug store buys in small *uantities. A customer of a discount warehouse club, such as #am+s Club, buys in large *uantities. 0 #he response time that customers are &illing to tolerate14o your customers buy on short notice and eApect *uick service or is a longer lead time acceptableF Customers of a fast food restaurant certainly buy on short notice and eApect *uick service. Customers buying custom machinery would plan the purchase in advance and eApect some lead time before the product could be delivered. 0 #he "ariety of products needed1Are customers looking for a narrow and well(defined bundle of products or are they looking for a wide selection of different kinds of productsF Customers of a fashion bouti*ue eApect a narrowly defined

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group of products. Customers of a %big boA& discount store like @al(5art eApect a wide variety of products to be available.
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ESSENTIA S o! Supply Chain "ana#ement

0 #he ser"ice le"el re'uired14o customers eApect all products to be available for immediate delivery or will they accept partial deliveries of products and longer lead timesF Customers of a music store eApect to get the C4 they are looking for immediately or they will go elsewhere. Customers who order a custom(built new machine tool eApect to wait a while before delivery. 0 #he price of the product1How much are customers willing to payF #ome customers will pay more for convenience or high levels of service and other customers look to buy based on the lowest price they can get. 0 #he desired rate of inno"ation in the product1How fast are new products introduced and how long before eAisting products become obsoleteF )n products such as electronics and computers, customers eApect a high rate of innovation. )n other products, such as house paint, customers do not desire such a high rate of innovation.

%e!ine Core Competencies o! *our Company

The neAt step is to define the role that your company plays or wants to play in these supply chains. @hat kind of supply chain participant is your companyF )s your company a producer, a distributor, a retailer, or a service providerF @hat does your company do to enable the supply chains that it is part ofF @hat are the core competencies of your companyF How does your company make moneyF The answers to these *uestions tell you what roles in a supply chain will be the best fit for your company. Be aware that your company can serve multiple markets and participate in multiple supply chains. A company like @.@. 8rainger serves several different markets. )t sells maintenance, repair, and operating 35!G: supplies to large national account customers such as Eord and
33

)asic Concepts o! Supply Chain "ana#ement

Boeing and it also sells these supplies to small businesses and building contractors. These two different markets have different re*uirements as measured by the above customer attributes. @hen you are serving multiple market segments, your company will need to look for ways to leverage its core competencies. arts of these supply chains may be uni*ue to the market segment they serve while other parts can be combined to achieve economies of scale. Eor eAample, if manufacturing is a core competency for a company, it can 3"

build a range of different products in common production facilities. Then different inventory and transportation options can be used to deliver the products to customers in different market segments.

Develop Needed Supply Chain Capabilities

Gnce you know what kind of markets your company serves and the role your company does or will play in the supply chains of these markets, then you can take this last step, which is to develop the supply chain capabilities needed to support the roles your company plays. This development is guided by the decisions made about the five supply chain drivers. Each of these drivers can be developed and managed to emphasi?e responsiveness or efficiency depending on the business re*uirements. ". Production1This driver can be made very responsive by building factories that have a lot of eAcess capacity and that use fleAible manufacturing techni*ues to produce a wide range of items. To be even more responsive, a company could do their production in many smaller plants that are close to maLor groups of customers so that delivery times would be shorter. )f efficiency is desirable, then a company can build factories with very little eAcess capacity and have the factories optimi?ed for producing a limited range of items. Eurther efficiency could be gained by centrali?ing production in large central plants to get better economies of scale. >9

ESSENTIA S o! Supply Chain "ana#ement

;. In"entory1!esponsiveness here can be had by stocking high levels of inventory for a wide range of products. Additional responsiveness can be gained by stocking products at many locations so as to have the inventory close to customers and available to them immediately. Efficiency in inventory management would call for reducing inventory levels of all items and especially of items that do not sell as fre*uently. Also, economies of scale and cost savings could be gotten by stocking inventory in only a few central locations. >. Location1A location approach that emphasi?es responsiveness would be one where a company opens up many locations to be physically close to its customer base. Eor eAample, 5c4onald+s has used location to be very responsive to its customers by opening up lots of stores in its high volume markets. Efficiency can be achieved by operating from only a few locations and centrali?ing activities in common locations. An eAample of this is the way 4ell serves large geographical markets from only a few central locations that perform a wide range of activities. 9. #ransportation1!esponsiveness can be achieved by a transportation mode that is fast and fleAible. 5any companies that sell

31

products through catalogs or over the )nternet are able to provide high levels of responsiveness by using transportation to deliver their products, often within ;9 hours. EedEA and ' # are two companies who can provide very responsive transportation services. Efficiency can be emphasi?ed by transporting products in larger batches and doing it less often. The use of transportation modes such as ship, rail, and pipelines can be very efficient. Transportation can be made more efficient if it is originated out of a central hub facility instead of from many branch locations.
35

Basic Concepts of Supply Chain Management

=. Information1The power of this driver grows stronger each year as the technology for collecting and sharing information becomes more widespread, easier to use, and less eApensive. )nformation, much like money, is a very useful commodity because it can be applied directly to enhance the performance of the other four supply chain drivers. High levels of responsiveness can be achieved when companies collect and share accurate and timely data generated by the operations of the other four drivers. The supply chains that serve the electronics markets are some of the most responsive in the world. Companies in these supply chains from manufacturers, to distributors, to the big retail stores collect and share data about customer demand, production schedules, and inventory levels. @here efficiency is more the focus, less information about fewer activities can be collected. Companies may also elect to share less information among themselves so as not to risk having that information used against them. lease note, however, that these information efficiencies are only efficiencies in the short term and they become less efficient over time because the cost of information continues to drop and the cost of the other four drivers usually continues to rise. Gver the longer term, those companies and supply chains that learn how to maAimi?e the use of information to get optimal performance from the other drivers will gain the most market share and be the most profitable.

+, ESSENTIA S o! Supply Chain "ana#ement

32

33

A supply chain is composed of all the companies involved in the design, production, and delivery of a product to market. #upply chain management is the coordination of production, inventory, location, and transportation among the participants in a supply chain to achieve the best miA of responsiveness and efficiency for the market being served. The goal of supply chain management is to increase sales of goods and services to the final, end use customer while at the same time reducing both inventory and operating eApenses. The business model of vertical integration that came out of the industrial economy has given way to %virtual integration& of companies in a supply chain. Each company now focuses on its core competencies and partners with other companies that have complementary capabilities for the design and delivery of products to market. Companies must focus on improvements in their core competencies in order to keep up with the fast pace of market and technological change in today+s economy. To succeed in the competitive markets that make up today+s economy, companies must learn to align their supply chains with the demands of the markets they serve. #upply chain performance is now a distinct competitive advantage for companies who eAcel in this area. Gne of the largest companies in $orth America is a testament to the power of effective supply chain management. @al(5art has grown steadily over the last ;. years and much, if not most, of its success is directly related to its evolving capabilities to continually improve its supply chain.

L)4%&-%,& I/75&-(6@,5((+/- &-.-5& %/ I/7%.

India is being touted as the land of opportunity for logistics service providers all over the world. I/7%./A& 3)4%&-%,& %/75&-(6 %& 0.&- ,)2%/4 %/-) %-& )1/: ')%&+7 -) -)5,$ B125 =%33%)/ %/ 2"1".F()2 B#" =%33%)/ .- '(+&+/-

34

I&"I)& LO2ISTICS I&"USTR#

ROAD

R)IL3)#S

SE)

)IR

Environment #can
)ndia

Logistics in India
4espite its favorable location between Asia and Europe and a population of more than " billion people, )ndia has hardly been able to position itself on the economic market. )t has only been in recent years that the country has been able to increasingly fleA its economic muscle. But, )ndia has much catching(up to do in logistics terms before it can reach the same level as the world+s leading industrial nations.

Geographic challenges in India

35

for )ndia is bordered on the north by the Himalaya 5ountains. Eor this reason, creating road and rail connections from this direction is a maLor undertaking. )n the south, though, the )ndian peninsula is well suited for sea harbors. )ndia is indeed the country with the world+s second(largest population. But the population is une*ually distributed, creating a maLor challenge logistics service providers.

Core countries for trade

The most important eAport countries for )ndian products are the 'nited #tates, the 'nited Arab Emirates, China, #ingapore and 8reat Britain. The biggest import trading partners are China, the 'nited #tates, #wit?erland, the 'nited Arab Emirates and Belgium .

Indian infrastructure
A vital step in )ndia+s further development is eApanding the road and rail networks, and moderni?ing harbors and airports. )n the process of globali?ation , which is eApanding )ndia+s position in world trade, transport volume has climbed rapidly in recent years. The eApansion of the logistics infrastructure has been unable to keep up with this pace. Eor this reason, transport capacities have already reached their limits.The transshipping times for ships in )ndian harbors are three to four times longer than the average time in the @est. 2ogistics costs are also very high in international comparison because of the poor infrastructure. Eor this reason, )ndia will have difficulties positioning itself as a global logistics hub in years ahead. !oad transport is especially important for )ndia+s transport system. After all, Transport hubs in )ndia )ndia has one of the world+s largest road networks, with a total length of >.> million kilometers. But much of this network does not meet @estern standards.Eor instance, a truck takes five to siA days to cover the ;,.J"(kilometer(long route between Bangalore and 4elhi. The government is indeed trying to introduce counter(measures and shift freight transports from the roads to the rails. But, first, the rail infrastructure must be eApanded and the connections to harbors and airports improved. 5any sub(areas of the J>,...(kilometer(long rail network still use the technology of ",9K, the year that British colonialists left. Gnly about one*uarter of the routes are electrified. Gne other challenge is the four gauge widths used in the rail network .

Logistics requirements and service areas

3!

!oad transports are characteri?ed by small forwarders who fre*uently use anti*uated technology. )n addition, the splintered political structure re*uires an eAcellent understanding of local conditions . As national highways in )ndia are built and road transports are increasingly liberali?ed, the productivity of road shipping will rise in years ahead. The network business with 2T2 in )ndia has eAcellent potential. The )ndian roadtransport market is forecast to rise to M9. billion by ;."; ( it is currently M;- billion . The CE market on the subcontinent is growing rapidly. )n the last five years, revenue has eAperienced double(digit growth, climbing to about MJ=. million. )ts share of the entire logistics market totals only about > percent. )nternational service providers are working to set up or ac*uire domestic networks in )ndia . 2ogistics service providers have been focusing more eAtensively on traditional storage functions and distribution. But the number of high(bay warehouses that meet European standards is eAtremely small. Typical added(value services that meet @estern standards also are hardly offered. Eor this reason, the contract logistics market in )ndia has a share of only about J percent of the entire logistics market .

Logistics centers in India

)n terms of logistics, )ndia remains a developing country in many areas. Eor instance, it has hardly any multimodal logistics centers. 4espite its good geographic position, )ndia has also been unable to evolve into a hub for international freight transports, like 4ubai. )n regional terms, )ndia lags behind logistics centers like #ingapore, Thailand and Hong Cong. Currently, )ndia is moving forward with a plan to turn the country+s "; main harbors into integrated freight hubs. 5any of these harbors do not have the rail and road connections needed to handle the transport volume of ships. Containers fre*uently sit for weeks in the harbor before they can be transported .

Important logistics service providers

The largest )ndian logistics service providers are #hipping Corporation of )ndia, Container Corporation of )ndia, 8reat Eastern #hipping, !eliance orts 7 Terminals, Essar #hipping, Transport Corporation of )ndia, !eliance 2ogistics, Blue 4art EApress, Darun #hipping Company and B2! )ndia. )nternational service providers are #chenker, 4H2, Arvato, CNhne O $agel and T$T .

Features of Indian Logistics Industry

37

0A number of small(integrated players 0Transportation costs account for nearly 9.P of production costs 02ogistics costs around ">P of 84 , compared to -P in the '#. 08rowth in )ndian economy is the maLor driving factor for the demand in logistics industry. 0Chemicals, metals, E5C8, cement and teAtiles have been identified as the top five contributors to logistics revenues

R$A%S
Indian Road Network
0)ndia has the second highest largest road network(>.> million km. 0'# has the largest road network with J.9 million km O China(".million km -$ational highway ;P of total road length. .But carry 9.P of goods traffic of )ndia.

Features of Indian Road Transport

0!oad $etwork carry nearly J=P of freight and -=P of passenger traffic. 0Dehicle ownership is firmly in the hands of individual truck owners 0JKP of vehicle owners have fleets of less than five vehicles. 0Traffic on roads is growing at a rate of K to ".P per annum 08overnment spends("; per cent of capital and > per cent of total eApenditure on roads.

3<

a!or Roads "ro!ects

0The 8olden Quadrilateral 38QH =,-9J km: connecting the four maLor cities of 4elhi, 5umbai, Chennai and Colkata 0The $orth(#outh and East(@est Corridors 3$#(E@H K,>.. km: connecting #rinagar in the north to Canyakumari in the south and #ilchar in the east to orbandar in the west 0 ort connectivity and other proLects

.uture Road Pro/ects

3#

The Golden #uadrilateral

4"

railway freight revenue

50000 40000 rs crore 30000 20000 10000 0 2002-03 2003-04 2004-05 2005-06 2006-07 year

RAI WA*S
41

Indian Rail Logistics

0The )ndian !ailways boasts of being the world+s ;nd largest rail network spread over -",="" km and covering J-,J stations 0The freight segment accounts for roughly two thirds of railway+s revenues. 0The tonne7kilometre costs for )ndian rail freight at three times that of China. RTata )ron O #teelS.

railway freight revenue

50000 40000
rs crore

30000 20000 10000 0

railway freight
2002-03 2003-04 2004-05 2005-06 2006-07
year

800 700 600 500 million ton 400 300 200 100 0

2002-03

2003-04
42

2004-05 year

2005-06

2006-07

India0s Sea o#istics

0)ndia now has the largest merchant shipping fleet among the developing countries. -)ndia ranks "Kthin the world in shipping tonnage 0)ndian share of maritime transport services is "P of world market 0The container traffic has registered an impressive growth of "= per cent over the last five years.

Port Privati1ation
0 ort traffic to grow to a level of J=. 5illion Tonnes er Annum by ;..-(5inistry of
#hipping 0 ort rivati?ation is picking up momentum(('#4".>, billion worth proLects approved. 0 layers ((( OG, #A, 5aersk, 8ammon )ndia, C@C and the 4ubai ort Authority.

43

Indian Ports

India0s Aviation o#istics Sector

0Aviation holds a small share of )ndia+ s freight market 0Air Ereight is very eApensive in )ndia in comparison to road and rail.

44

0The si?e of the world air cargo market is estimated at ;K million tonnes valued at M;.. billion. 0)ndia accounts for meager >P of the global air cargo market 0As per an eApert estimate, )ndian air cargo industry is going to be double by the year ;.".. 0Cargo(garments, machinery, components, pharmaceuticals, dyes, chemicals and perishables Rfruit, vegetables, flowers, fish and meatS. 05aLor )nternational cargo airports(5umbai, Chennai, Bangalore, Trichy, Hyderabad, 4elhi, Coimbatore, Cochin. .5aLor domestic cargo airports TAhmedabad, 8oa, 2ucknow, Disakhapatnam,5adurai in addition to the above.

international air cargo

100000 80000 cargo in ton 60000 40000 20000 0 2001-02 2002-03 year
45

2003-04

2004-05

domistic air cargo

50000 40000 cargo in 30000 ton 20000 10000 0 2001-02 2002-03 2003-04 2004-05

year

India0s Aviation 2rowth Plans

0)nvestments of '#4 =..K billion over neAt = years in )ndian Airport )nfrastructure
0Blue(4art, the only dedicated freight carrier in domestic sector. 0Air )ndia plans to increase cargo revenue from current ".P to "=(;.P in >yrs. 06et Air, 8oAir, Cingfisher Airlines charting out plans to play bigger role in )ndian domestic air cargo 0)nternational Airlines(Cathay acific and BA increasing cargo capacity to and from )ndia.

4!

47

Third Party o#istics3+P

+P
0>rd arty 2ogistics imply that one company acts as an agent to lookafter the logistics aspect of another company or group of companies. 0>!4 party logistics entails a study of the customer+s business, supply chain and distribution network, in order to formulate a comprehensive integrated logistics strategy, which will help render all supply(related services from a single window 0)ndiaUs > 2 sector represents > percent of the countryUs total logistics spend 0The )ndian > 2 market is eApected to grow at around ;. percent per annum in the neAt >(= years. 0The practice in )ndia reveals that warehousing and outbound transportation, custom clearing and forwarding are the most fre*uent outsourced activities. 0Activities such as packaging, fleet management and consolidationhave started gaining attention for outsourcing.

$"L %urvey in India

A survey by the Transport Corporationof )ndia 3TC): and the 5anagement4evelopment )nstitute 354): shows 0 less than ==P of )ndian companiessubscribe to > 2, compared to more than K=P globally. 0about =KP of the companies planto outsource reverse logistics within the neAt five years. 0=9P plan to outsource inventory management. 0=>P order processing. 0more than =.P of the companies have outsourced activities like transportation, warehousing Ocustoms clearing7forwarding.

4<

!easons for 2ogistics Gutsourcing

#ource/ TC) O 54) #urvey

Growth &rivers for Logistics in India

08eneral growth of the )ndian economy. 05anufacturing boom(for eAports as well as for domestic market. 0EApected rise in )nternational trade from )ndia. 05$C+s setting up manufacturing in )ndia($okia, EleAtronics. 08overnment+s thrust on )nfrastructure (('#M"K billion to upgrade highway networks. 0)mplementation of DAT will lead to growth in warehousing business.

4#

0Gpening of organi?ed retail sector (attracting retail chains like @al(5art and Carrefour in addition to )ndian players like antaloon and !eliance.

Government %upport

The )ndian government is making great efforts by 0 rivati?ing ports and airports. 0)ncreasing the number of gateway ports 0)nvesting in highway proLects 0#treamlining customs and eAcise procedures. 0)mplementing E4) systems 0)mproving the rail network. 0The government plans to invest M"K billion in transport infrastructure between ;..J( ;.". #ome of the proLects are/ 0Amend in the $ational Highway Act to eApedite land ac*uisition, permit private financing and allow tolling. 0)mprovement in rural access by launch of the rime 5inister+s !ural !oads rogram. -!eduction of congestion on rail corridors and improvement of port connectivity by launch of $ational !ailway 4evelopment rogram. 0'pgradation of infrastructure and connectivity in the countryUstwelve maLor ports by initiating the $ational 5aritime 4evelopment rogram. 0Establishment of Tariff Authority for 5aLor orts to regulate tariffs. 5"

Gn a per(annum basis, 'nited #tates invests = percent of its annual logistics spend on infrastructure, )ndia is investing ;> percent or over four times as much.

)ndustry 8rowthV2ogistics 8rowth

0%Engineering goods, chemicals and gems O Lewelry are the fastest(growing sectorsH manufacturing in )ndia is eApected to grow by ,.9 percent in coming years.& says 6ac*ues 8reen, 5anaging 4irector EedEA()ndia, 5iddle East O Africa.

Auto
0Gutsourcing in Auto sector could be worth M>K= billion by ;."= and )ndia could capture
up to M;= billion of this amount. Rsource/5cCinseyS

Chemicals
0)ndia +s chemical eAports could reach M"= billion by ;."=. Rsource / 5cCinsey

Electrical and Electronic Products

0)ndia+s eAport in electrical and electronic products could reachup to M"- billion a year by ;."=.Rsource / 5cCinseyS.

)ndustry 8rowthV2ogistics 8rowth

51

Retail
0Gpening up of the organi?ed retail sector is attracting big retail chains like @al(5art and Carrefour in addition to big )ndian retailers like antaloon and !eliance. 0All this would re*uire the presence of professional logistics players in the market to carry out supply chain activities. Thus demand for logistics services would be largely driven by the growth of the )ndian economy.

)ndian O Eoreign 2ogistics layers

0)nvesting to upgrade and move into > 2 arenaT8ati, #afeApress, atel 2ogistics, Blue 4art. 0!ecent ) G(AllCargo 8lobal 2ogistics. 0Container Ereight stations and )nland Container depots(Container Corporation of )ndia, 8ateway 4istriparksand Balmer 2awrie O Company. 0Bharti, Taco 5obiApps, atni Computersand !elianceare focusing on telematics Ta technology based on telecommunications plus computing. 0Alliances O Ac*uisitions (4H2 ac*uired Blue 4art, EedEA has a tieup with rakash Airfreight,!henus A8 has tied up with #eaways #hipping 2td. 0!edwood CityeApanding its )ndia presence by nearly =.P. 0#trong Base in )ndia(A 2 2ogistics, T$T EApress, ' # and 5aersk 2ogistics 0)n the port terminal business, 5aerskand OG ortsare consolidating their position by ac*uiring controlling stakes in private container terminals..

52

Challen#es !or Indian o#istics Companies

0Competition from )ndian and Eoreign logistics companies. 0Technology to keep pace with demand for real time information. 0Corporati?ation and lack of skill sets. 0#hedding local mindset and move to a global mindset. 0)ntegration of services and value added services. 0Eunds to fuel eApansion O growth. 0)nade*uate infrastructure and compleA taA laws.

.uture Pro/ected Trends

0The )ndian logistics market is likely to grow at a CA8! of KP during the neAt five
years. 0The unorgani?ed sector may find it difficult to eAist at national level due to its inability to keep pace with technology O customer demand. 0Transportation costs are bound to come down in future with improvement in infrastructure and growth in cargo movement. 09th arty 2ogistics to take root in )ndia. R)n 9 2, logistics is controlled by a service provider that doesnot own assets to carry out logistics activities but outsources to sub(contractors, the > 2S.

53

Top Nine Supply Chain Challen#es !or 4556

)etter make sure risk mana#ement is at the top o! your to3do list this yearW

As if a shattered economy isnUt bad enough, the prospects of supply chain disruptions on a global scale have manufacturers taking a closer look at their risk management strategies. According to Bernie Hart, global product eAecutive, logistics management, with financial services firm 6. . 5organUs 8lobal Trade #ervices group, while ;.., will have plenty of challenges for manufacturers, a number of promising opportunities will emerge as well. Hart lists the following nine trends that will characteri?e global supply chains throughout the year 7- Supply chain risk miti#ation in an economic downturn #upply chain risk mitigation will receive increased focus in ;.., versus past downturns due to the following factors/ supplier financial risk, volatility in energy, commodity, labor rates and currency eAchange,

unpredictable economic recoveries.

4- Searchin# !or workin# capital WThis trend will bring increased scrutiny to the supply chain as companies look to reduce inventory and lower operating or carrying costs,W Hart says. W)n addition, buyers will look to eAtend payment terms, while suppliers will drive to collect receivables more *uickly, creating the need for a li*uidity buffer (( such as supply chain financing (( to mitigate this brewing payables7receivables conflict. The current credit environment is pushing buyer7supplier partnerships to look to their trade flows to drive the creation of additional li*uidity.W +- A resur#ence in letters o! credit

54

Hart reports that his firm, financial giant 6. . 5organ, has seen a resurgence in the use of letters of credit to facilitate the financing of international trade. @ith credit getting tighter in all sectors, the supply of letters of credit have been declining while the cost has risen dramatically, Hart notes. WEor the right borrower and the right transaction there are still deals to be done, but the market will remain tight for the near future.W 8- Shortenin# the supply chain '.#. manufacturers will continue to reconfigure their supply chains, Hart says, by moving plant operations and sourcing vendors closer to home and away from Asia. W2imited free trade agreements, high energy costs, and rising labor and production costs in Asia all contribute to companies re( evaluating eAtended supply chains.W 5eAico in particular has become an increasingly popular source for manufactured goods, Hart notes, citing a '.#. Commerce 4epartment report that indicates a K.;P increase from year( to(date imports through 5eAico compared to the year before 9- Improved speed and savin#s in "e:ico 5eAico is piloting a new customs regime called the !egimen de !ecinto Eiscali?ado EstratXgico 3!EE:. WA customs regime,W as Hart eAplains, Wis a countryUs specific set of trade regulations, processes and practices that regulate the actions of importers and eAporters.W The 5eAican governmentUs hope is that the !EE will decrease logistics cost in terms of dollars per container and numbers of days in transit which, in turn, will help attract additional production to 5eAico. The program could save an importer between '#M;.. to MJ.. per shipment, according to 5eAico Customs estimates. The !EE is eApected to go live in early ;..,, Hart says. ,- "ore !ree3trade a#reements and more scrutiny @hile the 'nited #tates is eApected to finali?e three new free(trade agreements 3ETAs: in ;.., with Colombia, anama and #outh Corea, it remains an open *uestion as to whether the Gbama administration will view ETAs as a priority. WThe compleAity associated with understanding and leveraging ETAs is beyond the scope of many companies because they either lack the eApertise, resources, technology, or all of the above to do it efficiently and cost(effectively,W Hart says. W5any companies eventually come to a decision point/ either invest internally or outsource to a global trade eApert.W ;- China clamps down on oversi#ht WChinese officials have vowed to clamp down on product safety failures by

55

launching national investigations and ordering local officials to report all possible product safety issues,W Hart says. WThe regulatory environment is eApected to become stricter in China with the introduction of a control list or catalogue of commercial encryption products developed and made overseas. )mpacting high(tech manufacturers outside of China, this new control list calls for tighter regulatory oversight of firms that use encryption technology within their products.W <- The Amended acey Act The 'nited #tates is now the first country in the world to prohibit the import, eAport, sale or trade in illegally harvested wood and wood products. As a result of an amendment to the ".-(year old 2acey Act, the 'nited #tates now prohibits the import, eAport, sale or trade in illegally harvested wood and wood products, Hart says. WThis will re*uire detailed reporting (( scientific name, *uantity, value and country (( of any plant matter incorporated into an imported product brought into the 'nited #tates. This law broadly covers plants used in processing, no matter how miniscule the amount and no matter how far removed from the harvesting of the plant.W As Hart sees it, the amendment could have Wsignificant conse*uences for '.#. importers who will be subLect to new data reporting re*uirements,W although the specific scope of what items are covered under the amendment is still being defined. 6- A #lo=al eye toward consumer product sa!ety #igned into law in August ;..-, the Consumer roduct #afety )mprovement Act could lead to similar regulation around the world that will address safety standards and re*uirements for childrenUs products, such as mandatory testing, the reduction in lead paint usage, and more visible cautionary statements related to choking ha?ards, Hart reports. W)n $ovember ;..-, representatives from China, the European 'nion and the 'nited #tates met in Brussels for the first high(level trilateral summit on product safety to discuss key developments and further Loint activities to improve cooperation and the eAchange of information relating to consumer product safety. 'pon import, products must be accompanied by certification that they comply with all applicable consumer product safety rules and similar rules, bans, standards and regulations under any other laws administered by the importing nation.W

5!

World )ank report on lo#istics> Strate#ies and tactics !or a challen#in# marketThe Phenomenal 2rowth o! 2lo=al Trade $ver the past hal! century the =usiness world chan#ed dramatically throu#h #lo=ali1ation

8rowth in world trade has eAceeded the rate of domestic output every year since ",=. ",K> ( ",,,/ @orld trade grew at an annual rate nearly three times higher than world 8ross 4omestic roduct 384 : Trade to 84 !atio/ 0 '.#./ tripled since ",K. 0 @orld/ doubled since ",K.

In 4556 this #rowth is pro/ected to stall

4556 ? The %i!!erence a *ear "akes

;.., is forecast to eAperience the first year over year decline in global international trade volumes since ",-;.

57

12 10 8 trade 4 volume 2 0 -2 -4 2003 2004 2005 2006 2007 2008 2009 6

Competin# in 4556 ? New Issues at the .ore!ront )n the challenging ;.., market three trends will be the most impactful. How well a business addresses these will determine supply chain success/ Cash .low and Trade Terms 0 Gver ,.P of merchandise trade is funded by finance instruments 0 ApproAimately JK.,... small and mid(si?ed suppliers have folded. Security and Re#ulatory Compliance 0 5ore than ;J new transportation security regulations in past J years 0 $early ".P of international shipments already have compliance errors .luctuatin# .rei#ht Costs and Capacity
5<

0 Carriers working to remove eAcess capacity to stabili?e pricing. 0 9=. container ships have been idled T ""P of fleet @aria=le Ener#y Costs 0 Gil is priced in '.#. dollars, and is impacted by changes in currency. 0 "(cent increase in 6et(A fuel adds M",=m in carrier costs. Creatin# Advanta#e Throu#h Supply Chain "ana#ement #upply chain leaders 3corporations and countries: have been shown to significantly out(produce and outperform their peers. The global supply chain directly impacts, on average, K=P of a business+ operating results. Corporations with best(in(class freight and logistics competencies manifest market cap growth KP(;JP above industry average 'p to K.P of the variation in per capita income across countries can be accounted for by supply chain position. A "P rise in a nation+s ratio of trade to 84 increases per capita income by at least ..=P. Supply Chain Challen#es rimary research finds that supply chains fre*uently lack cohesive strategy and operational integration. This is true both for corporations and nations. .or Corporations and Nations alike> The supply chain is crucial to economic success Top obLectives are cost control and service eAecution Gperational plans are fre*uently not well integrated with strategy There is a gap between the recogni?ed importance of the supply chain and its operational performance #upply chain control is fragmented Companies and countries alike have difficulty effecting supply chain changes Supply Chain "ana#ement is Not a evel Playin# .ield

5#

Effective management of end(to(end freight and ancillary functions can reduce total distribution cost by up to =P, with the same impact on profit in many segments as a >.P increase in sales. !etail Business )mprovement Through End(to(End #upply 5anagement !educed #tock(Guts ;P(-P improvement 2ower )nventory 2evels ".P(9.P improvement )ncreased #ales =P(;.P improvement "> 5anufacturing Business )mprovement Through End(to(End #upply 5gmt 2ower )nventory 2evels ".P(9.P improvement Easter !eplenishment Cycles ";P(>.P improvement Higher #ales ;P(".P improvement Better Customer #ervice =P(".P improvement

In!ormation technolo#y in lo#istics industry

)n a report entitled, FTechnology #urvey for the )ndian 2ogistics )ndustry F ;..-F conducted by Cale Consultants 2td in partnership with Eeedback Business Consulting #ervices vt. 2td, reveals that new investments of )$! ;-=.;= billion 3'#M=.K billion: are eApected at airports in the neAt four years to boost their )T re*uirements, according to CaleFs head of logistics,#umeet $adkar. FThis is one of the segments where )T utilisation is maAimum compared to other segments in the logistics space,Fhe notes.

A !ra#mented industry
The )ndian logistics industry, comprising many disorganised enterprises, transporters, eApress cargo movers, courier companies, freight forwarders, container companies and shipping agents, is highly fragmented. Eirms are facing competitive pressures to focus on

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core operations and to lower costs which is leading to a growing demand for outsourced logistics services. The )ndian logistics industryFs si?e is estimated at )$!;.== trillion for EY ;..-, and its si?e is eApected to grow to )$!9." trillion by ;.">. Although road freight constitutes J. per cent of the overall industry, the sector is entirely vested in the hands of small private players. The top(end of the market is controlled by a handful of multinationals and large domestic players. $adkar says )ndia spends around "> per cent of its 84 on logistics, higher than in the '# 3". per cent:, Europe 3"" per cent: and 6apan 3". per cent:, and this translates to around )$!".= trillion in eAtra operating costs for the economy and therefore a loss in capitalformation.

A #rowin# air sector

According to Cygnus !esearch, the air transport sector contributes over ..; percentage points to the countryFs 84 at constant ",,,(;... prices. The Technology #urvey shows that the )ndian logistics industryFs )T eApenditure will more than double to about )$!". billion from the eAisting )$!9 billion within the neAt = years ( a compound annual growth rate 3CA8!: of about ;.F;; per cent. According to the @orld Air Cargo Eorecast ;..J(;..K, the market from )ndia and its neighbouring countries constituted about >., per cent of the worldFs air cargo traffic in tonnage and 9.; per cent in tonne(kilometres in ;..=(.J. )ndia is now among the top >. global freight markets, both in terms of total and international freight operations. According to industry forecasts, the airlineFs cargo business segment will more than triple by ;.;=. Gverall, the growth rate of the aviation sector in the neAt ". years is eApected to be not less than ;= per cent. According to the lanning Commission, )ndiaFs air cargo movements would grow at over a CA8! of "".= per cent from ;..K(.- to ;.""(";. Air cargo handling warehouses will need an estimated "=.,... s*m of space in theneAt =F". year

'r#ent need to invest

$adkar says )ndia risks missing out on " to ; per cent 84 growth unless significant strides are made to bridge the )T gap and improve supply chain efficiencies by effectively using technology. FAirfreight is often the neglected cousin of an airline, as well as an airportFs passenger business. Air cargo compleAes in )ndia are congested not only because of lack of capacity but also due to lack efficiency and planning,F he said.

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FTechnology can help )ndian airports overcome some of the space related constraints and utilise the eAisting resources in a better way. Eor eAample, the airports can make provisions for the agent to pay all his airport charges, re*uest for carting orders, receive advice of arrival and delivery order, all from his office rather than *ueuing up at the airport counters,F he says. #imilarly, an advance notification from the agent for bringing in cargo can help the airport operator plan his resources accordingly. This will stop the airport terminal gates from being choked with trucks which have to wait endlessly to load7unload cargo. $adkar says barcode and !E)4 usage can help track cargo through its life cycle. This also helps faster location of shipments at the cargo warehouse. He points to the eApress delivery industry F which is made up of 8AT), #afeApress, T$T 3#peedage:, TC), Blue 4art and #afe EApress F as the leaders in technology usage. These players will continue to remain the highesttechnology buyers constituting to >> per cent of the technology eApenditure by;."> from the present ;, per cent. The key growth driver in this sector is the opening of banking, insurance, retail, aviation and telecom sectors and their penetration in smaller cities due to an increase in global and domestic trade. $adkar says )ndia is emerging as a global outsourcing hub for )T, )Te#, pharma, teAtiles etc., and is set to become one of the largest trading partners in Asia. !egarding )ndiaFs courier sector, he says there was an increased usage of eApress and courier services by all key segments in the industry. The key players include Blue 4art, Eirst Elight, AE2, 4T4C, Gvernite and rofessional Couriers. Commenting on the freight forwarding industry made up of AE2, Alpha Cargo EApress, Gm 2ogistics, Total 2ogistic, @orldwide and All Cargo, $adkar says technology eApenditure in freight forwarding is eApected to grow by "J. per cent. This industry, which presently constitutes "9 per cent of the )T demand, is eApected to rise to about )$!".K billion, comprising "K per cent of overall )T spend by EY ;.">. Th e current )T market si?e is about )$!"". billion 3'#M;.> billion: and is eApected to reach )$!;"" billion 3'#M9.9 billion: by EY ;.">. $adkar says there are an estimated ;... to ;,".. freight forwarders in the country, including about J.. involved in airfreight. This includes key players like, Total 2ogistics, 8AT), EAcel, BaA 8lobal, 8eologistics, 4ynamic 2ogistics and TD# 2ogistics.

Sumeet Nadkar

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Report IT Critical To India

The )T spends in the )ndian logistics industryTthrough Ereight Eorwarding, Airports, @arehousing, EApress O Courier #ervices and !E)4 3!adio Ere*uency )dentification:1will grow in the neAt five years to approAimately two(and(a(half times the '#4M-> million now. This was the result of a survey, UTechnology #urvey for the )ndian 2ogistics )ndustry ( ;..-U conducted by Cale Consultants 2td. 'ir Cargo News FlyingTypers caught up with #umeet $adkar, Head(2ogistics #pecial Business 'nit of Cale Consultants to find out the reasons of growth in a market that has been afflicted by the downturn worldwide. #umeet pointed out that with the current uncertainties in the world economy Wit is tough to make predictions. %However, one fact remains that goods will have to move, as opposed to travel. %Travel can be replaced by video conferencing or teleconferencing, air cargo has to roll. %#o our view is that five years from now, globally the logistics industry will continue to grow at a steady rate of J(K percent.W %)n )ndia, he said, %the industry could continue to grow at about ";("> percent to satiate the demand of growing young population across the country. %Air Cargo will also continue to grow at about "" percent.& $adkar also pointed out that Wthe tough economic climate will necessitate the focus on efficiency and productivity more than ever.& Citing )ndiaUs eAample, he said, Wthe lack of automation in the )ndian logistics industry has given rise to the inefficiencies, duplication of processes. %@e believe with the global slowdown and tough competition, the logistics companies will be keen to embrace technology to increase operational efficiencies as well as create competitive differentiators.& As far as domestic air cargo is concerned, the sector does not look to be doing very well.
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4id he feel that the countryUs air cargo business will make strides big enough for )T to flourishF $adkar was confident that air cargo would do well. He said/ WThis is a classical chicken and egg situation and compounded by the fact that the air cargo industry is in the throes of change. %To attract more cargo to the air mode, costs will have to be both controlled and competitive. %)n order to ensure that the air cargo handling processes must be super(efficient, there has to be complete understanding of the market and its profitability and )T can accelerate fact(based solutions all around. %@ith the moderni?ation of the airports, and creation of intermodal hubs like the one in $agpur, the untapped domestic demand for safe and reliable transport is wide open to air cargo. %@hilst other modes such as roads and rail continue to languish. air cargo here needs to embrace various solutions such as )T in a significant manner to rationali?e processes and attract more customers. W)ndia,W he said, Wspends around "> percent of its 84 on logistics, higher than '.#. 3". percent:, Europe 3"" percent: and 6apan 3". percent:. This translates to around M>" bn in operating costs for the economy and therefore loss in capital formation. %)ndia risks missing out on " to ; percent 84 unless significant strides are made to bridge this gap and improve supply chain efficiencies by effectively using technology.W Among the Cale #urvey key findings/ 0 Technology spends in freight forwarding in )ndia are eApected to grow by "J. percent. 0 Technology spends for warehousing are eApected to Lump from the current M". mn to about M;= mn by ;.">. @arehousing, Cale says, is fast emerging as a strategic function, due to the rapid growth in retail and eApansion by domestic and international players. Elsewhere Cale reports, the eApress and courier business in )ndia will continue to remain the largest single group adding technology in the future constituting up to >> percent of technology growth here by ;.">, up from the present ;, percent.

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WhatAs the status o! the lo#istics industry in IndiaB and whatAs your !uture #oalC 2ogistics plays a vital role in bridging producers and customers1both in the domestic and international sectors. Eor economic growth the development of infrastructure 3ports, roads, rail, inland waterways, coastal shipping: ought to be improved. Also, communication and multimodal transportation, coupled with sophisticated handling, warehousing and )T systems, hold the key. There is need for implementation of national and state plansH in this regard with an appropriate fiscal policy befitting public(private partnership. olicies should facilitate implementation of proLects with minimum paperwork and *uicker resolution of proposals to ensure their *uick eAecution. The logistics industry in )ndia is highly fragmented with about "= established > arty 2ogistics 3 2: players. Transparency in commercial matters and business ethics should be ensured by streamlining documentary re*uirements which govern the entire gamut of supply chain management. 2esser state control and facile taA, fiscal and legal system would be of much assistance. These measures would not only help the industry, but also result in some manufacturers entrusting all their logistics services1 right from the point of dispatch to customer delivery. Thus giving birth to 9th arty 2ogistics, involving a separate specialised agency, as is the case in developed nations. Both the manufacturers and customers gain in such a situation which ensures competitive pricing and Uon timeU delivery. T5)22 visualises itself to become a 9 2 player in the near future and set up standards and benchmarks in the industry. T"I is investin# Rs +95 crore !or acDuirin# =erths and warehouses- At which ports would the new =erths =e constructedC The investments will be for ac*uisition of panamaA and handymaA vessles, up(gradation of handling facilities and augmentation of warehousing facilities over the neAt few years. Haldia and aradip port(based services will be strengthened, apart from eApansion of logistics activities in 5umbai and development of minor ports on the west coast. 2ocation of minor ports for development is under feasibility study. WhatAs your plan to develop a C.S at HaldiaC @e have been operating at Haldia 4ocks #ystem for over two decades, and the port has already allotted us the land. )nitially, the area of land which has been developed and used as a stack yard may be converted into a CE#. How will you !und your planned pro/ectsC !egarding funds, we have not yet formalised the matter. )t depends on the si?e of the proLect which we wish to develop. )Q 5artrade is well entrenched in terminal operations in Europe and '#. They are vessel owners and charterers who are well(versed in logistics services. Therefore, eApertise already eAists within the organisation. )f re*uired, we will not have reservation for a strategic alliance with a reliable and an established organisation. What tar#et have you set !or revenue in the ne:t two yearsC 4uring the first three years of operation, since the formation of the organi?ation, our revenue has increased threefold and BT >.= times. @e eApect this trend to continue as we have set for ourselves a target of !s ",... crore turnover by ;..-(.,, and being consistently EDA(plus.

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Customs rocedures and Eunctioning of Container Ereight #tations and orts

". )n accordance with international practice, all cargo goods imported into the country or eAported out of the country by sea, air, land or rail routes are governed by the provisionsof the Customs Act, ",J; and other laws of the country related to entry7 eAit from the country.Customs ensures that the import and eAport ofgoods are in compliance with the Customs Act and other laws in force. Accordingly, customs procedures are intended to provide definite, predictable methods by which the goods can enter the country and get cleared on payment of applicable import duties, fulfilling the re*uirements of the law of the land. ;. To regulate and to eAercise effective control over import and eAport activities, goods are allowed for import7eAport at notified places under section K of the Customs Act, ",J;. Custodians are appointed under section 9= of the Customs Act, ",J; for safe storage of goods till they are cleared for home consumption or warehoused. Clearance of goods involves classification, assessment, eAamination and payment of Customs duty on imported cargo on the basis of Bill of Entry presented by the importer or his authori?ed agent. The Central Board of EAcise and Customs 3CBEC: has prescribed the procedures through notifications, rules, regulations and circulars which are implemented by field formations. These are updated and modified according to the need, demands of trade and to improve the efficiency of the system. The role of Container Ereight #tations 3CE#:/( >.". CE# is a place where containers are stuffed, de(stuffed and aggregation7 segregation of eAport7import cargo takes place. @ith the growing volume of international trade, the need for eApeditious clearance of goods at the port within the minimum possible time has been gaining importance. This is more so when the ports are facing congestion at their premises. Eurther, for optimal utili?ation of eAisting infrastructure, space, e*uipment, goods that are landed at ports need to be evacuated straight away without any loss of time. Accordingly the concept of Container Ereight #tations 3CE#: has grown in importance along with the development and growth of ports. >.;. A CE# is an eAtended arm of ort7 )C47Aircargo CompleA, where import7 eAport goods are kept till completion of their eAamination and clearance. The imported goods can be immediately shifted from the port to CE# which also helps in the reduction of port congestion. All the activities related to clearance of goods for home consumption, warehousing, temporary admissions, re(eAport, temporary storage for onward transit and outright eAport and transshipments take place

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from such stations. Therefore, clearance of goods from CE# is an important point of consideration for trade in respect of eAport7 import Cargo as it is the final Customs contact point. Customs resent rocedure of clearance of goods at orts/( 9." The #hipping lines7steamer Agents7carriers7 Consol Gperators file the )mport 8eneral 5anifest 3)85: in accordance with #ection >. of the Customs Act, ",J;. After filing the )85 and on arrival of the goods, Custom House Agent7)mporter files Bill of Entry 3cargo declaration: in terms of #ection 9J of Customs Act, ",J;. The first stage for processing a Bill of Entry is noting7registration of Bill of Entry 3B7E:. The B7E is then forwarded to the concerned Appraising group in the Custom House dealing with the commodity sought to be cleared. The assessing officer in the appraising group assesses the duty liability, taking due note of any eAemption or benefits claimed by the importer. $ecessary checks regarding any restriction or prohibition on the goods imported are followed. )n case of doubt, the officer may give an eAamination order in advance of finali?ation of assessment. Gtherwise, the B7E is finally assessed and the importer deposits the duty calculated with the nominated banks. 9.; After assessment the B7E is passed on to the #hed Appraiser7#uperintendent for eAamination of goods along with the B7E. The #hed )nspector7eAaminers eAamine the goods and enter their report on the B7E with signature of the importer7CHA in token of eAamination in his presence. After completing the eAamination of the goods, the shed Appraiser7#uperintendent would give order for %Gut of Charge&. However, in rare cases, if some discrepancy is found between the declaration and the result of eAamination of cargo, the Assistant Commissioner74eputy Commissioner 3AC74C: revises the assessment on the basis of eAamination report. After issuance of Gut of Charge order on the B7E, the importer presents the same to the Custodian who in turn issues the 8ate ass after verification of correctness of Bill of 2ading and number of packages. The importer7CHA presents importer+s copy of the B7E and the Custodian 8ate ass to the Customs Gfficer at the gate while taking the goods out of the Customs area. =. As regards eAports, #hipping Bills are re*uired to be filed along with other documents such as invoice, Application for !emoval 3A!E:, packing list etc. The Assessing Gfficer in the eAport department checks the value of the goods, classification, rate of duty and others with regards to different provisions and the Eoreign Trade olicy and related documents. After the #hipping Bill is passed by eAport department, the eAporter presents the goods to the #hed Appraiser 3EAport: for eAamination. The eAamination is carried out under supervision of #hed Appraiser7 #uperintendent 3EAport: and after eAamination, officer gives a %2et EAport& order, after which eAporter may load the goods into vessel7aircraft under

!7

supervision of Customs Gfficer. Present procedure o! Clearance o! #oods at CE#/( J. The 5ain function of CE# is receipt, dispatch and clearance of Containeri?ed Cargo, up(to(date inventory control and tracking system to locate containers7cargo. K. The goods received at ports are brought to CE# and stacked in CE# after verification of the seal by Customs Gfficers. )n respect of import consignment, the #teamer Agents7liners7 )mporters desiring to take the consignment to CE#, file )mport 8eneral 5anifests in the port. After obtaining the permission from the AC74C, the Container moves to CE# under Customs escort or under bond and bank guarantee. The CE# allow de(stuffing of the goods. The CHA 7 importer files the Bill of Entry at Customs House and then Customs formalities of assessment, eAamination and payment of duty are completed. Thereafter, Customs gives %Gut of Charge& and the Custodian releases the goods from CE# by issuing a 8ate( ass. -. )n respect of eAports, the goods are brought directly to CE# under a #hipping Bill. The eAport cargo in 2ess than Container 2oad 32C2:7 Eull container 2oad 3EC2: is received by the Custodian of CE# for safe custody. After stuffing of the goods, Container7 Customs Bonded Truck 3CBT: is sealed by the Custom Gfficer and the same is removed from CE# for eAport through the desired ort.

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CONCLUSION
If infrastructure is improved across the country, it will bring down the logistics costs and enhance the services required by everyone seeking to invest in India. This will encourage more investments which will boost overall performance and bring out Indias real potential. Growth in express industry is highly correlated to G ! this sector has grown "# to $% percent annually for past three years in line but now Indian economy is bearing the brunt of recession adopting right strategies can pull it through and bring back the hay days with Indian and world economy stabili&ing in future logistics 'cenario in India is only going to improve and grow at rapid rate.

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