Distribution channels of Gati in retail segment: Scope and means for promotion and branding

By

Haresh L
PGDM 2009-11 BIMTECH

Under the Guidance of Industrial Guide Mr. Arindam Sen Gupta Manager, Retail Sales Gati Ltd, Kolkata Faculty Guide Mr. A K Dey Professor, Operations & SCM BIMTECH Greater Noida

27 May 2010

Acknowledgement
Before leaving for Kolkata from my college in Greater Noida, I was very apprehensive as to how I am going to spend my two months in a city to which Ive never been to, where people speak the language I dont understand. But here I am after my first stint in the corporate world to do a two-month summer internship to thank all those wonderful people who helped me to learn a lot in this brief period. In these two months I got the essence of why this internship is called summer internship. I take this opportunity to thank Mr. Arindam Sen Gupta, EDC Head Sales, Gati Ltd, Kolkata who helped me understand the intricacies of logistics industry and guided me through the project. Thanks to my faculty guide Prof. A K Dey who has always been there to engage in a discussion and clarify my doubts. I sincerely thank all those people at Gati Ltd, Kolkata from both Service and Marketing departments who helped me understand the operations involved in providing complex logistics service, particularly Miss Niharika Mohapatra, Mr. Raja Biswas, Mr. Jagannath Nag and Mr. Dinesh Sharma.

Contents
S. No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. Chapter Acknowledgement Executive Summary Introduction Logistics Supply Chain Management Global Logistics Industry 3PL Indian Logistics Industry Challenges faced by Indian Logistics Companies Opportunities for Logistics Industry Key Drivers of Growth Key Players Gati Ltd Company Capabilities Products/ services of Gati Evolution of Business mix Competitors Distribution Channels of Gati Elements of Distribution Network Channel Design Analysis and results of survey of Kiosks of Gati and competitors Conclusion and Recommendations Limitations References Appendix A: Questionnaire Appendix B: Channel margins 3 Page 2 4 6 8 9 11 13 16 18 19 21 21 22 26 26 28 30 31 34 35 36 40 41 42 43 45

Executive Summary
Indian logistics industry is going through a transformation. With an expanding economy, rising GDP and rising income levels of consumers there is an explosion of demand for logistics services. The proposed Goods and Services Tax (GST) to be introduced from next year, higher levels of FDI inflows and a greater expansion of domestic companies in the coming years will lead to an unprecedented growth in demand for logistics services from these companies to streamline their operations and supply chains. With the entry of big foreign players like FedEx, UPS, DHL and TNT there will be a consolidation in the market in the market in the form of Mergers and Acquisitions and joint ventures. With the rise in demand for specialized and reliable logistics there will be an increase in the market share of organized players who have scale and systems in place to offer these services efficiently. Setting up of Free Trade and Warehousing Zones (FTWZs), expansion of transportation infrastructure viz. road, rail, seaports and airports will lead to greater efficiencies in logistics in the country. Gati Ltd is a pioneer in Express Distribution and Supply Chain Solutions in India. It is in service industry providing specialized and complex logistics services to customers from different industry verticals. The objective of this report is to study the different distribution channels of Gati in retail segment and identify the scope for promotion, branding and expansion of the current distribution network. The methodology followed to meet this objective is to study and understand the Indian logistics industry by studying the industry trends and other aspects from several industry related publications, business and operations of Gati by studying the company annual reports and newsletters, internal operations and discussions with its employees and associates. This is followed by a study of its distribution channels and that of its competitors to identify areas of improvement.

A survey Gati kiosks and that of competitors has been conducted to study the services offered at these outlets, functions performed by them, their engagement with the company and identify the current modes of promotion at their locality. The results of the survey show that where as Gati is the preferred player for cargo services with little competition from other organized players but in courier services it lags due to severe competition, less number of outlets, and lack of promotion to make it a well known name and preferred player for this service. The company should increase its visibility by establishing more outlets at prime locations and promoting aggressively through sales force, sign boards and advertisements.

Introduction
The Problem: According to Stern and El Ansary (1992), distribution channels are sets of interdependent organizations involved in the process of making a product or service available for consumption. Gati Ltd is an Express Distribution and Supply Chain Solutions company providing logistics solutions to its customers. Gati has a multi modal distribution network to reach its customers. The different distribution channels are namely 1. Sales Force, 2. Gati Associates, 3. Kiosks, 4. Website and 5. Customer Care centre. The company broadly has two types of customers depending on the nature of their transactions with the company. They are Retail customers and Credit customers. Retail customers are those who do single or irregular transactions with the company. These customers deal in cash basis. There are other type of customers who are contractual customers and provide regular business to the company. These customers are extended a period of credit and provided the service according to the agreement. The objectives of this report is To study the current distribution channels of Gati Ltd in retail segment To identify the competitors of the company in retail segment and its outlets To study the distribution channels of competitors To identify the modes of promotion for the company and its outlets

The Approach: The methodology followed to meet these objectives is to study and understand the Indian logistics industry by studying the industry trends and other aspects from several industry related publications, business and operations of Gati by studying the company annual reports and newsletters, internal operations and discussions with its employees and associates. This is followed by a study of its distribution channels and that of its competitors to identify areas of improvement. A survey Gati kiosks and that of competitors has been conducted to study the services offered at these outlets, functions performed by them, their engagement with the company and identify the current modes of promotion at their locality.

Transportation Ever since the invention of wheel by mankind, there has been a revolution in the way people travel, work and live. We have come a long way since then and there were many technological developments, which made transportation convenient, comfortable and affordable. Transportation has converged the globe; it has brought people together, accelerated and globalised trade and commerce. Transport or transportation is the movement of people and goods from one location to another. It might seem to be a very simple task just move a mass from one place to another. But unfortunately it is not so. Just as I am writing this 130 flights of the Indian national carrier Air India were cancelled due to an employee union strike with customers straddled at several airports across the country for hours. Several airlines across the world went bankrupt. Transportation is a very complex process which involves effective management to carry out the entire process smoothly.

Transportation is the back bone of any economy. Though developments in the field of Information Technology have significantly reduced the need for physical movement, transportation still plays a major role in the movement of goods and people. Modes of transport include air, rail, road, water, cable, pipeline, and space. The field can be divided into infrastructure, vehicles, and operations. Logistics Logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers. Logistics is a part of supply chain management (SCM). The word logistics was first claimed to have been associated with the military in 1905 as a branch of war that pertains to the movement and the supply for armies.

Logistics involves the integration of information, transportation, inventory, warehousing, material-handling, and packaging, and occasionally security. Logistics is a channel of the supply chain which adds the value of time and place utility. Range of Logistics Services

Supply Chain Management (SCM) A supply chain is a set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer. Managing a supply chain is 'supply chain management'. In literature, logistics and SCM are often used interchangeably, though there is a subtle difference between the two. While SCM is more strategic in nature, logistics is more operations-oriented. Supply Chain Management is 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.

The evolution of logistics and SCM in the 1990s can be traced back to physical distribution management in the 1970s when there was no coordination among the various functions of an organization, and each was committed to attain its own goal. This myopic approach then transformed into integrated logistic management in the 1980s that called for the integration of various functions to achieve a system-wide objective. SCM further widens this scope by including the suppliers and customers into the organizational fold, and coordinating the flow of materials and information from the procurement of raw materials to the consumption of finished goods. The objectives of SCM are to eliminate redundancies, and reduce cycle time and inventory so as to provide better customer service at lower cost. The focus has shifted from the share of the market paradigm to the share of the customer paradigm, wherein the goal is to create customer value leading to increased corporate profitability, shareholder value, and sustained competitive advantage in the long run. The successive stages of evolution of logistics and SCM, the central characteristics of each stage, and the drivers of change are shown below.

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Global logistics industry: Currently the annual logistics cost of the world is about USD 3.5 trillion. For any country, the annual logistics cost varies between 9% and 20% of the GDP, the figure for the US being about 9%.

The logistics industry is a very competitive one with a large number of international players having presence in many countries. The service providers have a number of issues to address, such as pricing pressures, high costs of operations and low returns on investments, hiring and retaining talent, and pressure from clients to broaden the range of service offerings and internationalize operations, demand for customized solutions and more value-added services, besides infrastructure bottlenecks and government regulations.

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The service providers have to continuously upgrade their networks and systems and equip themselves with the latest technologies to carry out their complex operations and provide the best logistics services to their customers. This involves huge capital expenditure and an ongoing maintenance costs. Logistics companies the world over are increasingly investing in technologies like Warehouse Management System (WMS), Enterprise Resources Planning (ERP), Global Positioning System (GPS) and Radio Frequency Identification (RFID) to provide the best logistics services increasing transparency and efficiency of supply chains of their customers. Globalization, consolidation, technology advancements and outsourcing have led to growth in the logistics services market. The capabilities of logistics service providers are growing along with the changing expectations of their clients. As the logistics services industry evolves, competitors are moving away from asset-based commoditized services to more strategic, information-based approaches.

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3PL Third-party logistics (3PL) refers to outsourcing transportation, warehousing and other logistics related activities to a 3PL service provider that were originally performed inhouse. Third-party logistics (3PL) or logistics outsourcing is gaining importance as more and more corporations across the world, unable to manage their complex supply chains, are outsourcing logistics activities to the 3PL or logistics service providers. Globalisation has led to rapid rise in the need for outsourcing logistics by companies looking for readymade distribution channels to an entity with local expertise. Also the process of global sourcing by companies and supply chains increasingly becoming global and complex has given impetus to the growth of 3PL services.

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By outsourcing logistics activities, corporations are able to not only concentrate on their core business operations, but also achieve cost-efficiency and improve delivery performance and customer satisfaction. Further evolving from outsourcing logistics to 3PL service providers companies are moving towards 4PL and 5PL service providers to improve their logistics with minimum investments and in a cost effective manner. This process of evolution helps companies to build efficient supply chains, reach all the potential customers and achieve customer satisfaction leading to improved business performance impacting both revenue and profit growth.

System dynamics of a 3PL provider

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Indian Logistics Industry Background The logistics sector in India has evolved over the past two decades from being a pure transportation / warehousing functional service to provision of more value added offerings like customs clearance, domestic / international freight forwarding, crossdocking, reverse logistics, freight consolidation, warehousing of modern standards etc. India with a GDP of about Rs 31,297 billion is estimated to spend 13 per cent of its GDP on logistics creating an industry size of around Rs. 4,068 billion (approx. Rs 4 lakh crores). The industry generates employment to 4.5 crore people in the country. The sector has been witnessing double-digit y-o-y growth rate since 2002 and is expected to be more than USD 120 billion (approx Rs.5.4 lakh crores) by 2015. India ranked 47th in the World Banks 2010 Logistics Performance Index (LPI) out of 115 countries that were assessed for their efficient logistics systems with a score of 3.12 out of a possible 5. While there has been a growing recognition in India of logistics as a strategic tool for enterprise cost reduction and improvement of organizational efficiency on the flip side however, the logistics sector is characterized by dominance of a disorganized market. Transporters with fleets smaller than five trucks account for over two-thirds of the total trucks owned and operated in India and make up 80% of revenues. The freightforwarding segment is also represented by thousands of small customs brokers and clearing & forwarding agents, who cater to local cargo requirements. In order to reduce logistics costs and focus on core competencies, Indian companies across verticals are now increasingly seeking and using the services of third-party logistics service providers. Traditionally LSPs (Logistics Service Providers) concentrated mainly on transportation and logistics as they form a major share in logistics. However, in order to keep up with rising demands and customer expectations, companies now also concentrate on value added services like packaging, custom clearance, inventory management and labeling.

16

The major elements of logistics costs for Indian Industries include transportation, warehousing, inventory management and other value added services such as packaging. The figure on the right shows that transportation and inventories account for 35 % and 25 % of logistics cost respectively, indicating their importance in logistics.

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Challenges faced by Indian logistics sector These are among the supply chain challenges outside companies can expect as they enter the India market:

Limited physical infrastructure. In India the national highways account for less than 2 percent of the total road network, but carry 40 percent of the traffic. This is one reason the average speed in India is 20 miles per hour, compared to the Wests 60 miles per hour. The poor condition of roads translates directly to shorter vehicle lifespan, which increases operating costs and reduces efficiency. Off the highways, firms can only run trucks smaller than 20 feet. As of now, India invests less than 4 percent of its GDP in infrastructure, compared to Chinas 9 percent.

Over-burdened ports. India has a long coastline, but its port system isnt well utilized. Seventy percent of the seaborne trade is handled by 2 of its 12 major ports, while 180 minor ports go virtually unutilized. As a result, turnaround time far lags other global ports with vessels taking up to 3 days to debark. Many of the secondary ports have infrastructure problems that arent a quick fix. Even within its large ports, India cant support 6,000 TEU containerships, which make up 25 percent of todays shipping volume. In addition to constraining Indias growth in offshore production, this makes it difficult for manufacturers hoping to import, rather than produce products for Indian consumers.

Non-existent warehouse standards. There is virtually no complex distribution center set-up, no standards for suppliers, and little vendor compliance. Beyond that, firms will find there is little vacant DC space available. Firms entering the country will have to build this infrastructure, which will include supplying their own electricity, running water, and road access.

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Disorganized trucking operations. Two-thirds of fleets have less than five vehicles, making it difficult for shippers to manage the plethora of carriers required to handle shipment volumes. Freight consolidators and brokers take a commission to provide truck owners with consignments, and corruption is rampant. Also, inadequate infrastructure causes equipment maintenance costs to be abnormally high. These increasing costs and dwindling profits leave little opportunity for small fleet owners to expand.

Multiple tax structures at entry points of different states. Multiple tax rates at different states, octroi and different documentation requirements at the entry checkpoints of different states consumes time and increases complexity of trade between states. This acts a big blockade for movement of goods between states.

Opportunities: The Indian economy at USD 1.2 trillion and growing at the rate of 7.5% offers huge potential for the growth of logistics sector which is valued currently at USD 156 billion and expected to witness double digit growth in the coming years. The phasing out of VAT and introduction of Goods and Services Tax (GST) will remove multiple tax structures in different states and hence accelerate the interstate movement of goods. The investment in infrastructure projects like upgradation and setting up of seaports and airports at several locations across the country, the Golden Quadrilateral project and dedicated rail freight corridor will improve transport infrastructure in the country, reduce logistics costs and lead times. 19

 The setting up Free Trade and Warehousing Zones (FTWZs) on the lines of SEZs will increase investments in the sector and logistics infrastructure in the country. The 3PL market in India is least developed and highly fragmented. However, there is an immense potential for growth of 3PL in India, about 20% per annum with companies increasingly outsourcing their logistics to focus on core activities and achieve cost efficiencies. The new mass-merchant-style organized retailing, which today makes up less than 4 percent of the overall market, is expected to grow to $60 billion and increase the overall retail market by a compound annual growth rate (CAGR) of 21.8 percent by 2015.

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Key Players Indian logistics industry is a highly fragmented one with 99% of the market catered by many small unorganized players and most of the remaining 1% catered by a large number of organized players. So, one can see that the logistics industry in India is in a nascent stage. There are a large number of organized logistics service providers (LSPs) operating in India operating in several modes viz road, rail, air and sea. Over the year each player has developed competence in one or multiple modes, but none have achieved economies of scale to operate cost effectively due to severe competition from unorganized players.

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Sales of some key players in Indian logistics industry (in crores)

1400 1200 1000 800 600 400 200 0 Aegis Gati Blue Dart Sical TCI XPS Safex 2006-07 2007-08 2008-09

Sales growth over the previous year (in %)

70 60 50 40 30 20 10 0 -10 -20 Aegis Gati Blue Dart Sical TCI XPS Safex 2008 2009

As can be seen above all the logistics companies have seen a decline in their sales growth rates due to global recession followed by a slowdown in the domestic economy. Similarly the net profits of these companies were impacted.

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PAT of some key players in Indian logistics industry (in crores)

100 80 60 40 20 0 Aegis -20 Gati Blue Dart Sical TCI

2006-07 2007-08 2008-09

Change in PAT over previous year (in %)

100 50 0 Aegis -50 -100 -150 -200 Gati Blue Dart Sical TCI 2008 2009

Though the industry was impacted by a slowdown in the last fiscal, it is going to rebound in the coming year bolstered by a rebound in manufacturing and other economic activities.

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Gati Ltd
Company Background Gati is a pioneer in Express Distribution and supply chain solutions in India. Gati started operations in 1989 as a door-to-door cargo company. A division of Transport Corporation of India (TCI), it was the result of Mr. Mahendra K Agarwals conscious decision after he returned from the United States with a degree in management. When he joined TCI in 1980, it was one of the top three transport companies in India. His aim was to rebuild an otherwise successful TCI based on systems and processes and manage it professionally to meet implicit and explicit consumer needs. Based on customers feedback and interaction, Agarwal felt that, apart from moving cargo, TCI could do something different which customers would value and appreciate. Thus Gati was introduced in the market as a door-to-door cargo company with commitment on delivery and money back guarantee. The name Gati was selected to reflect and represent speed with direction. Agarwal was aware that Gati was a late entrant to the generic cargo business. To make progress, the business needed to be conducted with a different perspective. Gati was willing to wait to generate surplus from the business. Agarwal chose time bound, point to point delivery, premium priced cargo management service. With this offering, Gati introduced the concept of express cargo in the Indian context.

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VISION and MISSON statement Be a globally preferred provider of India-centric supply chain services and solutions, and a leader in the Asia Pacific region. Delight customers with quality service by setting new trends through innovation and technology. Be the most preferred organization for all stakeholders. Be a responsible corporate citizen with the unwavering commitment to environmental protection and conservation. Business: Gatis core business is Express Distribution and Supply Chain Solutions. It offers total end-to-end logistics solutions to its customers. Its two lines of business are

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Capabilities
Gati is Indias only multimodal logistics company, offering seamless connectivity across air, road, ocean and rail. It is the Indias first logistics company to receive ISO 9001 certification Gati covers 603 of Indias 611 districts, a reach unmatched by any other player. It has a fleet of 4000 vehicles, 94 refrigerated trucks and 6 marine vessels to ensure faster time to markets through well streamlined operations. Leverages an extensive technology backbone that allows tracking of shipments online Provides real-time delivery information on shipments Has over 2 million sq.ft. of best-in-class mechantronic warehousing space, spanning the length and breadth of India Delivers a record 3 million packages weighing over 46,000 tons every month Has a dedicated workforce of 2,850 well trained Gatiites Products/Services of Gati Gati offers a host of products and services customised to meet the logistics requirements of its customers. They are
Gati

Surface Express

Gati Air Express AI Gati Courier Gati Art Express Gati Supply ChainIntegrated Logistics Gati Kausar Cold chain logistics Gati Transport Solutions Full Truck Load

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Gati Europe Express Gati Global Express Gati Internationalthe global arm Gati Coast to Coastthe shipping division
Gati Gati

Happiness Gift services Student Express

With its superior coverage, reach, facilities and capabilities Gati is all geared to provide the best end-to-end logistics services to companies in different industry verticals. The company has over the years has evolved from a desk-to-desk cargo company to a preferred 3PL. Performance of the company

The companys revenue has consistently grown at a CAGR of 12% from 2001-2009 increasing its share of logistics services in the country

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Evolution of business mix Business by divisions:

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As can be seen from the below chart there has been shift in the companys business mix over the years from low margin express segment to high margin logistics and freight segment. The trend to outsource logistics to 3PL will further improve the earnings of the company.

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Increase in assets and a rise in capabilities

The company has continuously invested in assets to increase its capabilities to deliver the best logistics solutions. The company is transforming its network into a hub and spoke model to increase the reach and operational efficiency.

Major competitors The company over the years has built an extensive capability over the years to take on competition, both from domestic and international competitors operating in the country. But the competitors are catching up. Since the market for reliable logistics services is increasing new players are entering the market and the established players are consolidating. Many large manufacturing and service units like Reliance, Mahindra & Mahindra, Future Group have established their own in-house logistics divisions. Now these companies plan to provide logistics services to other companies also. 30

The major competitors of Gati in Express Division are TNT Safexpress TCI XPS AFL Blue Dart

Distribution channels of Gati in Retail segment

In a country like India with so many diversities no single distribution channels is perfect. Companies have to adopt a multi modal distribution network keeping in view of the factors like market potential, nature of the product, customer expectations, company strategy, industry trends, etc to reach a maximum number of potential customers. Gati has two types of customers one who has a long term relationship and regular transactions with Gati. These customers are contractual customers who are extended a period of credit as per the agreement. Then there are customers who do a single transaction or irregular transactions with Gati, these customers deal with Gati on cash basis and the segment is called Retail Segment. They can be either individuals or businesses. Gati is in service industry providing complex logistics solutions to customers. Gati follows a multi modal distribution network to reach both business and individual customers. Here time and material safety are critical factors affecting the customer satisfaction. So the company has to keep in mind these aspects while designing a distribution channel.

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The different Booking channels in the distribution network of Gati are as follows.

1.
OU

2.
OU

Kiosk / Cafe GA

Customer

Customer

3.
OU

Sales Force

GA

Booking/ Pickup

Customer 32

4.

Customer

Online Booking/ Enquiry Sales Force

Company Website

5.

Customer

Customer Service centre

Sales Force

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Elements of the distribution network

The several elements of Distribution network are as described below: OU Operating Unit (OU) is the company office/hub which administers all the operations in the regions under it. It may also act a transit hub. Franchise - A franchise is a channel partner appointed by the company to carryout the operations of an OU where the company doesnt have its own infrastructure or chooses to do so depending on market conditions. Kiosk A kiosk is a channel partner whose main job is to operate an outlet where customers can book their shipments to be carried by the company. Caf A caf is a company owned outlet where apart from booking services, other services like Internet browsing, Printouts and Photocopying services are also offered.

GA Gati Associate (GA) is a channel partner who owns a vehicle and maintains it as prescribed by the company whose primary job is to liaise with the areas sales force, take shipment orders from customers, do booking, pickup the material from customers door and deliver it at the regional OU. Sales Force Sales Force consists of the personnel of the company whose key responsibilities are Retention business development (RBD), New business development (NBD), Channel partner development (CPD), Collections and Promotional activities in the area under him.

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Channel Design
Earnings are shared with members of the distribution channels depending upon the function performed by them in the channel, product, individual docket charges and rates applicable after a ceiling on earnings of the member in a month. Kiosk: The main function of a kiosk is booking a shipment. A kiosk is paid depending on whether it has its own connectivity with Gati, the kind of product offered and an upper and lower limit on margins per docket. GA: The main function of a GA is providing connectivity i.e. carrying a shipment. A GA is paid depending on whether it is booking/delivery, the kind of product offered, and ceiling on the earnings in a month and an upper limit and lower limit on margins per docket. Franchise: The main function of a Franchise is operating an OU. A franchise is paid depending on whether it is booking/delivery, the kind of product offered, and ceiling on the earnings in a month and an upper limit and lower limit on margins per docket. For a detailed channel design of different members refer to Appendix B

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Analysis of survey of Gati kiosks and competitor outlets

A survey of all the24 kiosks of Gati in Kolkata over a period of 20 days to find out the nature of transactions done at these outlets, average sales per month, promotional activities carried out at these outlet locations and their experience with company and its sales personnel. Kiosk sales per month (in Rs)
9% 9% 39% 17% < 50000 50000-100000 100000-200000 300000-400000 400000-500000

26%

Average Courier and Cargo booking ratio at Kiosks

15%

Courier Cargo

85%

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From the above graph it is clear that kiosks are doing very low business in courier bookings. Competitors in courier services

13% 24% DTDC 20% Blue Dart First Flight Overnite Others 20% 23%

From the above graph it can be concluded that courier industry is a very competitive one with a large number of competitors vying aggressively with their distribution network and price for the small pie. Competitors in Cargo services
14% 10% Blue Dart 11% Gati Safexpress 7% TNT 37% XPS Others 21%

From the above graph it is clear that Gati has very little competition in cargo and express distribution services and the company should focus on this segment. 37

Experience with company and its workforce

17%

0%

Verybad 46% Bad OK Good VeryGood 37%

What should be done by the company to increase sales at kiosks?

32% Prom otion Im prove services Better support

47%

21%

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Distribution infrastructure of logistics companies in Kolkata

Courier companies
140 120 100 80 60 40 20 0 DTDC First Filight Overnite Gati Blue Dart

Cargo Companies

30 25 20 15 10 5 0 Blue Dart Gati Safexpress XPS AFL TNT

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From the above two graphs it is amply clear that Gati has adequate market penetration as compared to other companies in cargo business. So the company should focus on its cargo business and expand its share of the pie.

Conclusions and recommendations

The Indian logistics industry is going through a transformation. The sector will see an unprecedented growth in the coming years with improved infrastructure and a uniform tax structure. This will improve logistics performance and bring down overall product cost making Indian products globally competitive. Gati has good distribution network for cargo business as compared to its competitors. But when it comes to courier business it does not have the adequate reach to compete with the other courier companies who have huge distribution infrastructure and compete on low prices.

From the survey of outlets, Gati (37%) is the preferred player in logistics services for cargo business and Safexpress (21%) is its nearest competitor. But when it comes to courier services it has many competitors like DTDC, Blue Dart and First Flight.

Gati should expand its distribution network by setting up more outlets in prime locations which will increase its revenues and also increases the brand visibility.

Gatis vehicles on road are a good mode of promotion, but it should step up its promotion efforts by aggressively promoting its services through sign boards, hoardings and media ads. It should support its outlets to promote the services of Gati in their locality by providing adequate promotional material.

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Limitations
This study is an exploratory research to find out what kind of services are offered by the company outlets, who are their competitors in their locality and what kind of promotion is carried out by these outlets. This considers only retail customers of the company who deal with company on cash basis. The study is carried out at outlets in and around Kolkata only. The results of the study are applicable to that location only and the results may vary significantly for other locations due to different distribution networks of the company and its competitors and different market conditions.

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References
1. Mentzer, J.T. et al. (2001): Defining Supply Chain Management, in: Journal of Business Logistics, Vol. 22, No. 2, 2001, pp. 125 2. Vrat, P., 1999. Supply Chain Management in India: Problems and Challenges. In: Sahay, B.S. (ed.), Supply Chain Management for Global Competitiveness, Macmillan, 10-24 3. Seturam, S., 1999. Corporate Profitability and Supply Chain. In: Sahay, B.S. (ed.), Supply Chain Management for Global Competitiveness, Macmillan, 77-93. 4. Evans, R. and Danks, A., 1998. Strategic Supply Chain Management: Creating shareholder value by aligning supplying chain strategy with business strategy. In: Gattorna, J. (ed.), Strategic Supply Chain Alignment, Gower, 18-37. 5. Mitra, Subrata., Logistics Industry: Global and Indian Perspectives, IIM Calcutta Research Papers 6. Mitra, Subrata., 2005, A Survey of the Third-Party Logistics (3PL) Service Providers in India, IIM Calcutta Research Papers 7. Deloitte Conference paper on SMEs in logistics: Bringing value to the changing Indian landscape 8. Deloitte Report on Logistics and infrastructure: Exploring opportunities 9. May 28, 2008 Goldman Sachs Report on Indian logistics industry 10. Gati Ltd Annual Report 2008-09 11. BCG Report on Creating Distribution Advantage in India 12. Yerlan Ergalievich Manatayev, June 2004, Commoditization of the Third Party Logistics Industry, MIT Center for Transportation and Logistics

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Appendix A
Questionnaire for Survey 1. Name 2. Address 3. Years with Gati 4. Nature of location a) Commercial f) Suburbs 5. Is the outlet company owned or outsourced? a) Company Owned b) Outsourced b) Academic c) Residential d) Institutional e) Industrial Years in this industry

6. What are the products/services other than logistics being offered at the outlet? 7. What are the sales (from logistics) per month? 8. What is the Courier and Cargo business ratio? 9. What is the Cash and Credit business ratio? 10. What is the Domestic and International business ratio? 11. Is the booking done online or offline? a) Online b) Offline

12. How many persons are employed in the outlet? a) One b) Two c) Three or more

13. What are their qualifications? (Optional)

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14. What is the booking timing? 15. What are your major functions? a) Booking b) Pickup c) Storage d) Dispatch e) Delivery f) Other

16. Is the pickup and delivery done by self or the company? a) Self b) Company c) Third Party

17. Who are your competitors in Courier business? a) Blue Dart b) DTDC f) Others c) First Flight d) Overnite Express e) Professional

(specify) g) None

18. Why do you think so? 19. Who are your competitors in Cargo business? a) AFL b) Blue Dart c) Safexpress g) None 20. Why do you think so? 21. What is the infrastructure and support being offered by the company? 22. How do you handle customer complaints? 23. Who do you communicate with? a) Area sales person d) Service Manager b) Service personnel c) Retail Manager e) Customer service executive f) Other d) TNT e) XPS f) Others (specify)

24. How do you communicate with the company? a) Mobile b) e-mail c) Personal Visits d) Through Sales force

e) Through service personnel 25. What are the incentives being provided by the company? 26. What is your experience with the sales force and other employees of the company? a) Very bad b) Bad c) OK d) Good 44 e) Very good

27. What are the means (modes) of promotion in the area? 28. What should be done by the company to increase sales? 29. Any suggestions

Appendix B Channel Margins

GA Ceilin g Max/D kt Min/kt 50000 580 15 Booking Expr ess Basis Paid TBB FOD % 9 7 8 % After Ceiling 6 6 6 % After Ceiling 6 6 6

Priori ty

Basis Paid TBB FOD

% 8 6 7 Delivery % 70 Paise/K g

% After Ceiling 60 Paise/Kg

45

Franchise connectivity Ceilin g 70000 Max/D kt 1000 Min/kt 22.5 Booking Expr ess Basis Paid TBB FOD % 13.5 12 10.5 % After Ceiling 8 8 8 % After Ceiling 8 8 8

Priori ty

Basis Paid TBB FOD

% 12 10.5 12 Delivery % 70 Paise/K g

% After Ceiling 60 Paise/Kg

Franchise - Gati connectivity Ceilin g 70000 Max/D kt 1000 Min/kt 22.5 Booking Expr ess Basis Paid TBB FOD % 9 7 8 % After Ceiling 6 6 6 % After Ceiling

Priori ty

Basis

46

Paid TBB FOD

8 6 7 Delivery % 70 Paise/K g

6 6 6

% After Ceiling 60 Paise/Kg

Kiosk- connectivity Ceiling Max/Dkt Min/kt

No Ceiling 1000 10 Booking % 13.5 12 % 9 9 % 22 22

Express

Basis Paid FOD Basis Paid FOD Basis Paid FOD

Priority

Zipp

Kiosk- Gati connectivity Ceiling No Ceiling Max/Dkt 1000 Min/kt 10

47

Express

Basis Paid FOD Basis Paid FOD Basis Paid FOD

Booking % 9 8 % 6 6 % 17 17

Priority

Zipp

48