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INTRODUCTION

Logistics is concerned with getting the products and services where they are needed

when they are desired. It is difficult to accomplish any marketing or manufacturing without

logistical support. It involves the integration of information, transportation, inventory,

warehousing, material handling, and packaging. The operating responsibility of logistics is the

geographical repositioning of raw materials, work in process, and finished inventories where

required at the lowest cost possible.

The formal definition of the word ‘logistics’ is: - it is the process of planning,

implementing and controlling the efficient, effective flow and storage of goods, services and

related information from the point of origin to the point of consumption for the purpose of

conforming to customer requirements.

Logistics Management in BLR INDIA 1

FUNCTIONS

1) Information management

Management is appreciating importance of information as an element of logistics of

late, now. The role of information is vital in order processing. Quality of information is

critical as error in composition of information requirement creates potential disturbance in the

supply chain. Incorrect order processing due to erroneous information will result into product

recall and reshipment if the sales opportunity still exists. Faster and Qualitative information

flow from customer to processor, results into cost effective logistics. Forecasting and

order management are two areas of logistical work dependent on information.

Leading firms typically have information systems capable of monitoring logistical

performance on a real time basis giving them the capability to identify potential operational

breakdowns and take corrective actions prior to customer service failure. In situations where

timely corrective action is not possible, customers can be notified in advance and thereby

taking the surprise out of forthcoming service failures

2) Inventory control

Keeping the stock levels in such a position, so that neither stock out nor stock piling

takes place is Inventory control. While formulating inventory policies find out 20% of the

products marketed that account for 80% of the profit.

3) Transportation

Transportation is the most visible of all elements of logistics and high contributor to

logistics expenditure. Costs of transportation are mainly as follows :


a) Movement costs : Money paid for moving material across geographical terrain

b) Preservation costs : money spent on preserving the material during transit

c) Cost of idle asset : inventory is unavailable for conversion during transit. This results

into costs for organization

d) Administration costs : money spent on administration

Transportation is accomplished in three ways

a) One’s own fleet – private carriage

b) Contract with specialists on long term basis – contract carriage

c) Contract on individual shipment basis – common carriage

Expectations from transportation service are

a) Minimum Cost : transportation costs are explained earlier

b) Speed : speed of transport means the speed with which goods reach the destination.

c) Consistency : consistency in speed is achieving the same speed over a long period of

time. Consistency reflects on the reliability of carrier. Any unexpected variance can

play havoc with logistics. Modern information technology has made continuous

tracking of consignments possible. This takes the element of surprise out. IT has helped

logistics managers to seek out ways and means to improve speed and consistency. What

is becoming important is a combination of speed and consistency.

Requirement of speed depends on type of industry. In some situations speed may not be

important, the transportation service offering high speed increases cost. So logistics managers,

have to strike a balance between service and cost. Three important aspects of transportation

are facility location, transportation cost and consistency. Design of logistics system should

consider total costs rather than elemental cost of transportation.


4) Warehousing

Warehousing is holding material before dispatch after it is produced. Although

warehousing is conventionally considered to be a storage facility, it plays a much higher role

from logistics viewpoint. It is perceived to be a switching facility rather than a storage facility.

Warehouse ownership can be private, public or third party contract. Warehouse provides

economic benefits such as Movement Consolidation, Break-bulk, Cross-dock,

Processing/Postponement & Stock Piling and Service benefits like Spot Stocking, Assortment,

Mixing & Production support to the logistical system.

5) Material handling

Material handling covers receiving, moving, storing, dispatching

activities. It has an impact on cost [capital as well as running], quality and

safety. One of the principles of material handling is minimum movement.

Commonly used material handling equipment are forklifts, EOT Cranes,

hoists, pulley blocks, trolleys, railroad cars, conveyers, ropes and slings etc.

6) Packaging

Packaging is done to make handling and transporting cost effective. It protects the

product in transit and handling. Packing is expected to facilitate lifting and moving by

providing easy access to forks or hooks. Packing is also expected to display universal symbols

and other instructions for handling.

For Eg. Pallets and containers, wooden boxes, wrapping etc.


Functions of packaging [how packaging helps reducing overall costs & value addition]

1) Protection : Protection from environment, pilferage, shocks of handling and

moving. Fried chips in tennis ball boxes.

2) Cube minimization : The truck is cubed out, that means the truck is full space

wise, but not fully utilized weight wise. E.g. Round containers, round bottles.

Cube minimization is reducing the space occupied by the product to cut the

freight charge. Square shaped bottles and oval shaped containers.

3) Weight minimization : The truck is full, weight wise, but not fully utilized space

wise. Liquids in glass bottles. Weight minimization is reducing the weight of the

consignment to fully utilize the capacity of the truck. Liquids are packed in

plastic bottles reducing the weight.

4) Facilitating handling & using : fruit juices in tetra packs, handling and

consumption by users.

5) Facilitating storage & reuse : ink cartridges for printers, floppies, CDs, reusable

corrugated boxes, bottles and refill packs.

6) Grouping goods into convenient unit for distribution: mangos in boxes, milk

bags in crates, cola bottles in crates.

7) Reducing pilfering opportunities : pilfer proof caps, pilfer proof seals

8) Communication :

a) Content identification : what does this contain? Product, manufacturer,

universal code etc. with high visibility

b) Tracking : bar codes and scanners


c) Handling instructions : fragile, which side up? Temperature restrictions,

environment concerns, potential dangers etc

Palletization and Unitization

Unitization, unit loads:

Unitization is a concept where size shape, weight, volume of the items is considered and

a collection of such items is decided in terms of these factors. And always in this unit inventory

is moved whenever required.

1. This leads to standardization of handling equipment, methods and training

2. Now, the standardization reduces the time for handling and cost of handling

3. Inbound shipment checking is simplified

4. When transport vehicles are standardized to unit loads, product protection is improved

Examples: bottles in crates, steel sheets in coils, steel ropes in coils etc. container also is an

example of unit load.

Palletisation

Unit load is secured on a pallet to facilitate handling and protect the product which is

unitized. One can say container is a self contained, ie., unitized and palletized, shipping unit.

Pallet facilitates use of standardized handling equipment like a forklift or a crane. Without the

use of pallet it would almost impractical to use this equipment.

1. Palletized unit loads bring down time of handling and cost of handling

2. Safe handling

3. Product is well protected


Types of pallets :

1. Wooden pallets very commonly used, but break and disintegrate, wood is a rare

natural resource

2. Plastic pallets, light, recyclable - being researched

3. Pressed wood fiber pallet

4. Solid molded plastic pallets

5. Corrugated fiber board pallet

6. Corrugated fiberboard slip-sheet to provide cushion effect to the unit load

7. Refrigerated pallets : self-contained shipping units for refrigerated materials

8. Pallet pools : central pools to collect pallets and issue pallets to global business


THE MISSION OF LOGISTICS MANAGEMENT

The mission is to plan and coordinate all those activities necessary to achieve desired

levels of delivered service and quality at lowest possible cost. Logistics must therefore be seen

as the link between the marketplace and the operating activity of the business. The scope of the

logistics spans the organization, from the management of raw materials through to the delivery

of the final product.

Materials flow

Requirements information flow


Suppliers Procurements Operations Distribution Customers

LOGISTICAL INTEGRATION

Inventory Flow

Information Flow

INTEGRATED LOGISTICS

Logistics is viewed as the competency that links an enterprise with its customers and

suppliers. Information from and about customers flows through the enterprise in the form of

sales activity, forecasts and orders. As products and materials are procured, a value added

inventory flow is initiated that ultimately results in ownership transfer of finished products to

customers. Thus the process is viewed in terms of two inter-related efforts, inventory flow and

information flow.

1) Inventory Flow

The management of logistics is concerned with the movement and storage of materials

and finished products. Logistical operations start with the initial shipment of a material or

component part from a supplier and are finalized when a manufactured or processed product is

delivered to a customer.


Manufacturing support

Physical distribution

Procurement

Suppliers

Customers

From the initial purchase of a material or component, the logistical process adds value

By moving inventory when and where needed. Thus the material gains value at each step. For a

large manufacturer, logistical operations may consist of thousands of movements, which

ultimately culminate in the delivery of the product to an industrial user, wholesaler, dealer or

customer.

Similarly for a retailer, logistical operations may commence with the procurement of products

for resale and may terminate with consumer pickup or delivery.

The significant point is that regardless of the size or type of the enterprise, logistics is useful

and requires continuous management attention.

In order to understand logistics it is useful to divide it into three areas.



Procurement


The area of physical distribution concerns movement of a finished product to the

customers. In physical distribution the customer is the final destination of the marketing

channel. Unless the products are delivered where and when needed, a great deal of marketing

effort can be wasted. All physical distribution systems have one feature in common: they link

manufacturers, wholesalers and retailers and ensure that the product is available.


The area of manufacturing support concentrates on managing W.I.P inventory as it

flows between the stages of manufacturing. A Master Production Schedule is prepared and

arrangements are made for timely availability of materials, components, parts etc.


Manufacturing support has one significant difference when compared with physical

distribution. Physical distribution attempts to satisfy the needs of the customers while

manufacturing support involves movement requirements that are under the control of the

manufacturing enterprise.

Procurement

Procurement is concerned with purchasing and arranging in-bound movement of

materials, parts and /or finished inventory from suppliers to manufacturing or assembly plants,

warehouses or retail stores. Procurement is also known as purchasing and buying and in some

cases inbound logistics. Procurement s concerned with availability of the desired material

assortments where and when needed. Within a typical enterprise, the three areas of logistics

overlap. The prime concern of an integrated logistical process is to coordinate overall value-

added inventory movement. The three areas combine to provide integrated management of

materials.

2) Information flow

Information flow identifies specific locations within a logistical system that have

requirements. Information also integrates the three operating areas. The primary objective of

developing and specifying requirements is to plan and execute integrated logistical operations.

Within individual logistics areas, different movement requirements exist with respect to size of

order, availability of inventory, and urgency of movement. The primary objective of

information sharing is to reconcile these differences.

Logistical information involves two major types of flows:

a) Coordination flows

b) Operation flows


a) Coordination flows

Coordination is the backbone of the overall information system. Coordination

results in plans specifying :

Strategic objectives : Strategic objectives detail the nature and location of

customers, which are matched to the required products and services to be

performed.

Capacity constraints : Capacity constraints coordinate internal and external

manufacturing requirements. Capacity constraints identify limitations, barriers,

within basic manufacturing capabilities and determine appropriate outsource

requirements.

Logistical requirements : Logistics requirements specify the work that

distribution facilities, equipment and labour must perform to implement the

capacity plan.

Inventory deployments : Inventory deployments are the interfaces between

planning/coordination and operations that detail the timing and composition of

where inventory will be positioned.

Manufacturing requirements : Manufacturing plans are derived from logistical

requirements and typically result in inventory deployment.

Procurements requirements : Procurements requirements schedule material and

components for inbound shipment to support manufacturing requirements. In

retailing and wholesaling situations, procurements involve manufacturing

requirements.


Forecasting : Forecasting utilizes historical data, current activity levels, and

planning assumptions to predict future activity levels. Logistical forecasting is

generally concerned with relatively short –term predictions. The overall purpose

of information planning/coordination flow is to integrate specific activities

within a firm and to facilitate overall integrated performance.

b) Operational flows

The second aspect of information requirements is concerned with directing

operations to receive, process, and ship inventory as required supporting customer and

purchasing orders. Operational requirements deal with

Order management

Order processing

Distribution operations

Inventory management

Transportation and shipping

Procurement


SUPPLY CHAIN & LOGISTICS MANAGEMENT

Traditional Perspective

Traditionally most organizations have viewed themselves as entities that exist

independently from others and indeed need to compete with them in order to survive. However

such a philosophy can be self-defeating idf it leads to unwillingness to corporate in order to

compete. Behind this seemingly paradoxical concept is the idea of supply chain integration.

Definition

“ Supply chain management is the management of upstream and downstream

relationships with suppliers and customers to deliver superior customer value at less cost to the

supply chain as a whole.”

Explanation

The supply chain is the network of organizations that are involved through upstream

and downstream linkages, in the different processes and activities that produce value in the

form of products and services in the hands of ultimate consumer. Thus for example a shirt

manufacturer is a part of a supply chain that extends upstream through the weavers of fabrics to

the manufacturers of fibres, and downstream through distributors and retailers to the final

consumer. Each of these organizations in the chain are dependent upon each other by definition

and yet and yet paradoxically by tradition do not co-orporate with each other.

Clearly this trend has many implications for logistics management, not the least being

the challenge of integrating and coordinating the flow of materials from a multitude of

suppliers, often offshore, and similarly managing the distribution of the finished product by

way of multiple intermediaries.


Differences between Supply chain management and Logistics management

1. Supply chain management is a broader concept whereas Logistics management is a

narrower concept.

2. The concept of Supply chain management is relatively new whereas the concept of

Logistics management is relatively old.

3. Supply chain management is an extension of Logistics management.

4. Logistics management is primarily concerned with optimizing flows within the

organization whilst supply chain management recognizes that internal integration by

itself is not sufficient.

5. Logistics is essentially a planning orientation and framework that seeks to create a

single plan for the flow of product and information through a business. Supply chain

management builds upon this framework and seeks to achieve linkage and co-ordination

between processes of the other entities in the pipeline, i.e. suppliers and customers, and

the organization itself.

6. The focus of Supply chain management is upon the management of relationships in

order to achieve a more profitable outcome for all parties in the chain where as the

focus of Logistics management is upon the management of resources within the

organization.


LOGISTICS PLANNING PROCESS

To match the changing environment in the logistics due to the changes in the markets,

competitors, suppliers and technology, there is a need for a systematic planning and design

methodology to formally include the relevant consideration and effectively evaluate the

alternatives.

Methodology

The logistics relational and operating environment is constantly changing. Even for the

established industries, a firm's markets, demands, costs and service requirements change

rapidly in response to the customer and competitive behavior. Just as no ideal logistical system

is suitable for all enterprises the method for identifying and evaluating alternative logistics

strategies can vary extensively. However there is a general process applicable to most logistics

design and analysis situations. The process can be segmented into three phases: problem

definition and planning, data collection and analysis, and recommendations and

implementation. The following discussion describes each phase and illustrates the types of

issues encountered.

PHASE I : PROBLEM DEFNITION AND PLANNING

Phase 1 of logistics system design and planning provides the foundation for the entire

project. A thorough and well-documented problem definition and plan are essential to all that

follows.

1. Feasibility Assessment

The process of evaluating the need and desirability for change is referred to as

feasibility assessment and it includes the activities of situational analysis, supporting logic

development, and cost benefit estimation. The objective of doing so is to understand the


environment, process, and performance characteristics of the current system and to determine

future estimation.

a) Situational analysis : The purpose of the situational analysis id to provide senior

management with the best possible understanding of the strengths and weaknesses

of the existing logistics capabilities for both current and future environment. The

situational analysis is the performance of measures and characteristics that describe

the current logistics environment through :

Internal review: Internal review is necessary to develop a clear understanding

of existing logistics by covering the overall logistics process as well as each

logistics function with respect to its stated objectives and its capabilities to meet

those objectives. It profiles historical performance, data availability, strategies,

operation and tactical policies and practices. All major resources such as

workforce, equipment, facilities, relationships and information are examined.

The comprehensive review attempts to identify the opportunities that might

motivate or justify logistics system redesign or refinement. Assessment must

consider the process (physical and information flows through the value – added

chain), decisions (logic and criteria currently used for value chain management),

and key measures for each major logistics activity. These measurements focus

on the key performance indicators and the firm’s ability to measure them.

Market assessment & competitive evaluation: the objective is to document

and formalize customer perceptions and desires with regard to the changes in the

firm’s logistical capabilities. It’s the review of the trends and service demands

required by customers by the use of interviews with the selected customers or

through customer5 surveys. The assessment focuses on the external relationships

with the suppliers, customers (wholesalers and retailers) and consumers (final

consumer). The assessment not only considers trends in requirements and

processes but also the enterprise and the competitor’s capabilities.


Technology Assessment: it focuses on the application and capabilities of the

key logistics technologies, including transportation, storage, material handling,

packaging, and information processing. The assessment considers the firm’s

capabilities in terms of current technologies and the potential for applying new

technologies. The objective of the assessment is to identify advancements that

can provide effective trade – offs with other logistics resources such as

transportation and inventory.

b) Supporting logic development : The second feasibility assessment task is

development of a supporting logic to integrate the findings of the internal review,

external assessment and technology study. Supporting logic development builds on this

comprehensive review in three ways.

First - supporting logic development forces a critical review of the potential

opportunities for logistics improvements and a determination of whether

additional investigation is justified, using logistics principles such as tapering

principle, principle of inventory aggregation. The resulting benefits or costs

should be clearly identified.

Second - it critically evaluates current procedures and practices using

comprehensive, factual analysis and evaluation that isn’t influenced by opinion

and thus help in identifying areas with improvement potential which in turn

provides a foundation to determine the need for strategic adjustment. The

deliverables of this evaluation process include classification of planning and

evaluation issues prioritized into primary and secondary categories across short

and long range planning horizons.

Third - the process of developing supporting logic should include clear

statements of potential redesign alternatives such as

Definition of current procedures and systems


Identification of the most likely system design alternatives based on leading

industry and competitive practices

Suggestion of innovative approaches based on new theory and technologies

The alternatives along with being practical should also challenge the existing

practices. Flow diagrams and /or outline illustrating the basic concepts associated with each

alternative are constructed, which frame opportunities for flexible logistics practices, clearly

outline value added and information flow requirements and provide a comprehensive

overview of the options. A recommended procedure requires the manager responsible

for evaluating the logistical strategy to develop a logical strategy to develop a logical

statement and justification of potential benefits. Using customer service concept and

logistics integration logic and methodology, the manager should commit to paper the

most attractive strategy alternatives.

c) Cost benefit estimate : The final feasibility assessment is a preplanning estimate of

the potential benefits of performing a logistics analysis and implementing the

recommendation. Benefits should be categorized in terms of:

Service improvements - It includes results that enhance availability,

quality or capability. Improved sciences increase loyalty of existing customers

and may also attract business.

Cost reduction - Cost reduction benefits may be observed in two forms:

First, they may occur as a result of a one time reduction in financial or

managerial resources required to operate the existing system for e.g. Reduction

in capital deployed for inventory and other distribution related assets

Second, cost reductions may be found in the form of out - of - pocket or variable

expenses. For e.g. new technologies for material handling and information

processing often reduce variable cost by allowing more efficient procedures and

operations.


Cost prevention - Cost prevention reduces involvement in programs and

operations experiencing cost increases. Any cost prevention justification is

based on an estimate of future conditions and therefore is vulnerable to some

error for e.g. many material – handling and information technology upgrades are

at least partially justified through financial analysis of the implications of future

labor availability and wage levels.

In the final analysis, the decision to undertake in – depth planning will

depend on how convincing the supporting logic is, how believable estimated

benefits are, and whether estimated benefits offer sufficient return on investment

to justify organizational and operational change. These potential benefits must

be balances against the out 0- of pocket cost required to complete the process.

2. Project Planning : Logistics system complexity requires that any effort to identify and

evaluate strategic or tactical alternatives must be planned thoroughly to provide a sound basis

for change. Project planning involves five specific items:

a) Statement of objectives : The statement of objectives documents the cost and

service expectations for the logistics systems revisions. It’s essential that they be stated

specifically and in terms of measurable factors. The objective fine market or industry segments,

the time frame for revisions, and specific service levels. For e.g., desired delivery of 98 percent

of all orders within 48 hours after the order is placed, minimal customer shipments from

secondary distribution centers, back – orders held for a maximum of five days, etc. specific

definitions of these objectives direct system design efforts to ache9ice explicit performance

levels. Total system cost can then be determined.

b) Statement of constraints : The second project planning consideration concerns

design constraints. On the basis of the situational analysis, it’s expected that senior

management will place restrictions on the scope of permissible system modifications depending

on the specific circumstances of individual firms. But constraints can affect the overall


planning process for e.g. one restriction common to distribution system design concerns the

network of manufacturing facilities and their product mix assortment which the management

often holds constant for logistical system redesign as there are large financial investments in

existing production facilities. The purpose of developing a statement of constraints is to have a

well-defined starting point and overall perspective for the planning effort. The statement of

constraints defines specific organizational elements, buildings, systems, procedures, and/or

practices to be retained from the existing logistical system.

c) Measurement standards : Such standards direct the project by identifying the cost

structures and performance penalties and by providing a means to ass’s success. Management

must stipulate guidelines for each category as a prerequisite to formulation of a plan. It is

important that the standards adequately reflect total system performance rather than a limited,

sub optimal focus on logistics functions. Once formulated, such standards must be held

constant throughout system development. An important measurement requirement is to

quantify a list of assumptions that underlie or provide the logic supporting the standards.

Measurement standards should include definitions of how cost components such as

transportation are calculated and also relevant customer service measures and method of

calculation must also be included.

d) Analysis procedures : Analysis techniques range from simple manual methods to

elaborate computerized decision support tools. For e.g., models incorporating optimization ort

simulation algorithms for evaluating and comparing alternative logistics warehouse networks.

Once the project objectives and constraints are defined, planning must identify alternative

solution techniques and select the best approach. Selection an analysis technique must consider

the information necessary to evaluate the project issues and options

e) Project work plan : On the basis of feasibility assessment, objectives, constraints

and analysis technique, a project work plan must be determined and the resources and time

required for completion identified. The alternatives and opportunities specified during the

feasibility assessment provide the basis for determining the scope of the study. In turn the scope


determines the completion time. One of the most common errors in strategic planning is to

undere4stimate the time required to complete a specific assignment. Overruns require financial

expenditures and reduce project credibility. There are a number of PC – based software

packages available to structure projects, guide resource allocation, and measure progress.

PHASE II: DATA COLLECTION AND ANALYSIS

Once the feasibility assessment and project plan are completed, phase 2 focuses on data

collection and analysis. This includes activities to (1) define assumptions and collect data, and

(2) analyze alternatives

1) ASSUMPTIONS AND DATA COLLECTION :

This activity builds on the feasibility assessment and project plan to develop detailed

planning assumptions and identify data collection requirements. Specific tasks are as follows

a) Define analysis approach and techniques : The most common techniques are

analytical, simulation and optimization

The analytical approach uses standard numerical methods, such as those available

through spreadsheets, to evaluate each logistics alternative. For e.g., spreadsheet availability

have increases the use of analytical tools for distribution applications

A simulation approach can be likened to a “wind tunnel” for testing logistics

alternatives. Simulation is widely used, particularly when significant uncertainty is involved.

The testing environment can be physical (a model material handling system that physically

illustrates product flow in a scaled down environment) or numerical (such as a computer model

of a material handling environment that illustrates product flow on a computer screen) current

software makes simulation one of the most cost effective approaches foe dynamically

evaluating logistics alternatives


Optimization uses linear or mathematical programming to evaluate alternatives and

select the best one. Because of its powerful capabilities, optimization is used extensively for

evaluating logistics network alternatives such as the number and location of the distribution

centers.

b) Define and review assumptions : Assumptions definition and review build on the

situation analysis, project objectives, constraints and measurements standards. For planning

purposes, the assumption defines the key operating characteristics, variables and economies of

current and alternative systems. Assumptions generally fall into three classes:

Business assumptions - They define the characteristics of the general environment including

relevant market, consumer, and product trends and competitive actions, within which an

alternative logistics plan must operate. They are generally outside the ability of the firm to

change.

Management assumptions define the physical and economic characteristics of the current or

alternative logistics environment and are generally within the firm’s ability to change or refine.

Typical assumptions include a definition of alternative distribution facilities, transport modes,

logistics processes and fixed and variable costs.

Analysis assumption defines the constraints and limitations that must be included to fit the

problem to the analysis technique. These assumptions frequently concern problem size, degree

of analysis detail and solution methodology.

c) Identify data resources : The process of data collection begins with a feasibility

assessment. A fairly detailed specification of data is required to formulate or fit the

analytical technique. For situations when data are extremely difficult to collect or when

the necessary level of accuracy is unknown, sensitivity analysis can be used to identify

data collection requirements.


For e.g. an initial analysis may be completed using transportation costs estimated with

distance – based regressions. The types of data required in a logistical design n study

can be divided into three classes: business assumptions, management assumptions and

analysis assumptions. The majority of data required in a logistical study can be obtained

from internal records. Although considerable searching may be needed, most

information is generally available.

The first major data category is sales and customer orders. The annual sales forecast and

percentage of sales by month, as well as seasonality patterns are necessary for determining

logistics volume and activity levels. Historical samples of customer order invoices are also

needed to determine shipping patterns by market and shipment size. The combination of

aggregate measures of demand and detailed order profiles of projects the requirements that the

logistics system must be capable of satisfying. Specific customer data are also required to

consider the cost and time associated with moving the products across distance. Customers and

markets ate often aggregated by location, type, size, order frequency, growth rate, and special

logistical services to reduce analysis complexity.

For integrated channel analysis, its necessary to identify and track the costs associated

with manufacturing and purchasing. It’s often necessary to consider the number and location of

plants, product mix, production schedules and seasonality. Identification of policies and costs

associated with inventory transfer, reordering, and warehouse processing, inventory control

rules and product allocation procedures. For each of the current and the potential warehouse,

the operating costs, capacities, product mix, storage levels and service capabilities should be

established.

Transportation data requirements include the number and type of modes utilized, modal

selection criteria, rates and transit times, and shipping rules and policies.

For most logistics analysis applications, a select amount of future market data is useful

for evaluating future scenarios. Although the management may be able to prepare a


consolidated sales forecast it is difficult to prepare a market-by-market projection of sales.

There can be two solutions to this problem.

1. Usage of demographic projections that correlate highly with sales can help the

company to estimate future demand levels and hence determine future logistics requirements.

Secondary data published by various government agencies can also provide a data bank of

environmental information

2. Keeping a watch on the competitors strategies and capabilities by documenting

competitive logistical system designs and flows can be helpful in providing competitive

benchmarks that compare customer service capabilities, distribution networks and operating

capabilities.

d) Collect Data : Once the data sources have been identified the company can start

assembly of required data and conversion of that data to an appropriate format for the

analysis tool. To avoid errors like overlooking data that does not reflect major

components of logistical activity or collection of data from a misrepresentative time

period, the data collection process should be properly documented.

e) Collect Validation Data : The objective of validation is to increase management

credibility regarding the analysis process and to ensure that the results of the analysis

accurately reflect reality. It is important to ensure that a through investigation is

conducted into analytical results based on data that might not accurately reflect the past.

2) ANALYSIS

The analyst uses the technique and data from the previous activity to evaluate logistics

strategic and tactical alternatives. The process of analysis includes


a) Define analysis questions

This involves defining specific analysis questions concerning alternatives and the range

of acceptable uncertainty. The questions build on research objectives and constraints by

identifying specific operating policies and parameters. For e.g.: In the case of inventory

analysis questions might focus on alternative service and uncertainty levels.

b) Complete and validate baseline analysis

The second task completes the baseline analysis of the current logistics environment

using the appropriate method or tools. Results are compared with validation data collected

previously to determine the degree of fit between historical and analytical findings. The

comparison should focus on identifying significant differences, determining sources of possible

errors and identifying and correcting them.

c) Complete alternative analysis

An evaluation of systems alternatives should be accomplished either manually or

electronically to determine the relevant performance characteristics of each alternative.

d) Complete sensitivity analysis

In this phase uncontrollable factors like demand, factor cost or competitive actions are

varied to assess the ability of potential alternatives to operate under a variety of conditions.

Sensitivity analysis in conjunction with an assessment of potential scenario probabilities is then

used in a decision tree to select the best alternative.

PHASE III - RECOMMENDATIONS & IMPLEMENTATIONS

Phase III operationalize planning and design efforts by making specific management

recommendations and developing implementation plans.


a) Recommendations

Alternative and sensitivity analysis results are reviewed to determine recommendations

to management. There are four steps in this part of the phase namely: -

1. Identify the Best Alternative

Performance characteristics and conditions for each alternative must be

compared to identify the two or three best options. The decision tree analysis should identify

the best alternative i.e.: The one that meets the desired service objectives at the minimum total

cost.

2. Evaluate Costs and Benefits

A Cost Benefit analysis compares the alternatives for a base period and then

projects comparative operations across a particular planning horizon. Potential benefits such as

cost reduction; service improvement and cost prevention are identified and quantified. In other

words when evaluating the potential of a particular logistical strategy an analysis comparing

present cost and service capabilities with projected conditions must be completed for each

alternative.

3. Develop a Risk Appraisal

Risk Appraisal considers the probability that the planning environment will

match the assumptions. It also considers the potential hazards related to system changeover.

Risk related to adoption of a selected alternative can be quantified using sensitivity analysis.

For e.g.: Assumptions can be varied and the resulting influence on system performance for each

alternative can be determined. The end result of a risk appraisal provides a financial evaluation

of the downside risk if the planning assumptions fail to materialize. Risks related to system

changeover such as unanticipated delays, a series of contingency plans etc can also be

quantified and a series of contingency plans could be tested to determine their possible impact.


4. Develop Presentation

The final step in this procedure is a presentation to the management / submission

of a report that identifies specific operating and strategic changes, provides qualitative reasons

for suggesting these changes and then quantitatively justifies the changes in terms of service,

expenses, asset utilization or productivity improvements.

b) Implementation

The actual plan or design implementation is the final process activity. An adequate

implementation procedure is the only means to obtain a tangible return from the planning

process. This broadly includes four phases.

1. Define Implementation Plan

The implementation plan has to be defined in terms of the individual events, their

sequence and their dependencies. The planning process may initially develop at a macro level.

But it must ultimately be refined to provide individual assignment responsibility and

accountability. Plan dependencies identify the interrelationships between events and thus define

the completion sequence.

2. Schedule Implementation

The implementation plan is scheduled based on the assignments identified in the

previous stage. The schedule must allow adequate time for acquiring facilities and equipment,

negotiating agreements, developing procedures and training.

3. Define Acceptance Criteria

The criteria for evaluating the success of the plan are then developed. The Acceptance

Criteria should focus on service improvements, cost reduction, improved asset utilization and

enhanced quality. Although the acceptance criteria may focus on the area / function which was

the main focus for the Plan, it should also take a broad perspective that focuses on total

logistics system performance rather than the performance of an individual function.


4. Implement

The final task is actual implementation of the plan or design. Implementation must

include adequate controls to ensure that performance occurs on schedule and that acceptance

criteria are carefully monitored.


TRANSPORTATION

Transport Functionality

Transportation is one of the most visible elements of logistics operations.

Transportation provides 2 major functions :

Product movement

Product storage.

Product Movement

Whether the product is in the form of materials, components, assemblies, work-in-

process, or finished goods, transportation is necessary to move it to the next stage of the

manufacturing process or physically closer to the ultimate consumer. A primary transportation

function of product movement is moving up and down the value chain. Since transportation

utilizes temporal, financial, and environmental resources, it is important that items be moved

only when it truly enhances the product value.

Transportation involves the use of temporal resources because product is inaccessible

during the transportation process. Such product, commonly referred to as in-transit inventory, is

becoming a significant consideration as a variety of supply chain strategies such as just – in –

time and quick response practices reduce manufacturing and distribution center

inventories.Transportation uses financial resources because internal expenditures are necessary

for private fleets or external expenditures are required for commercial or public transportation.

Product Storage

A less common transportation function is temporary storage. Vehicles make rather

expensive storage facilities. However, if the in-transit product requires storage but will be


moved again shortly (e.g. in a few days), the cost of unloading and reloading the product in a

warehouse may exceed the per-daily charge of storage in the transportation vehicle. In

circumstances where warehouse space is limited, utilizing transportation vehicles may be a

viable option.

One method involves loading on the vehicle and then having it take an indirect route to

its destination. This is desirable when the origin or destination warehouse has limited storage

capacity.

A second method to achieve temporary product storage is diversion. This occurs when

an original shipment destination is changed while the delivery is in transit.

E.g. suppose a product is initially scheduled to be shipped from Chicago to Los

Angeles. However, if during the delivery process, it is determined that San Francisco is in

greater need of the product or has available storage capacity; the product could be delivered to

the alternative destination of San Francisco.

In short, although product storage in transportation vehicles can be costly, it may be

justified from a total cost or performance perspective when loading or unloading costs, capacity

constraints, or the ability to extend lead times are considered.

Principles

There are two fundamental principles guiding transportation management and operations.

They are economy of scale and economy of distance.

Economy of scale refers to the characteristic that transportation cost per unit of weight

decreases when the size of the shipment increases.

E.g. truckload shipments cost less per pound than less-than-truckload shipments. It is

also generally true that larger capacity transportation vehicles such as rail or water are less


expensive per unit of weight than smaller capacity vehicles like motor or air. Transportation

economies of scale exist because fixed expenses associated with moving a load can be spread

over the load’s weight. The fixed expenses include administrative costs of taking the order;

time to position the vehicle for loading or unloading, invoicing and equipment cost. These costs

are fixed because they do not vary with shipment volume.

E.g. suppose the cost to administer a shipment is $ 10.00. Then the 1-pound shipment

has a per unit of weight cost of $10.00, while the 1,000 pound shipment has a per unit of weight

cost of $0.01. Thus, it can be said that an economy of scale exists for the 1000-pound shipment.

Economy of distance refers to the characteristic that transportation cost per unit of

distance decreases as distance increases.

E.g. a shipment of 800 miles will cost less than two shipments (of the same combined weight)

of 400 miles. Transportation economy of distance is also referred to a se tapering principle

since rates or charges taper with distance. The rationale of distance economies is similar to that

for economies of scale.

Longer distances allow the fixed expenses to be spread over more miles, resulting in

lower overall per mile charge.

These principles are important considerations when evaluating alternative transportation

strategies or operating practices. The objective is to maximize the size of the load and the

distance that is shipped while still meeting customer service expectations.

Transport Infrastructure

Transportation infrastructure consists of the rights-of-ways, vehicles, and carrier

organizations that offer transportation services on a for-hire or internal basis. The nature of the

infrastructure also determines a variety of legal and economic characteristics for each mode or

multimodal system. A mode identifies the basic transportation method or form.


Transportation Cost Elements

Following are the essential elements of transportation to be taken into account:

1. Transport Mode – The most critical decision is the selection of appropriate mode of

transport. This fixes two basic elements of distribution function:

a) Transit time or time lapse between production and sale;

b) Level of transportation costs.

There is an inverse relationship between transit time and transport cost – the lower the transit

time, the higher the transport cost. However, a decision that takes into account only one cost

factor cannot be justified. An evaluation of the effect of transit time on other costs must also be

considered. Unsold production represents a high cost, and the longer the transit time, the higher

the level of unsold production.

2. Inventory Costs – A first class service to clients often requires immediate delivery and,

hence a higher level of inventory at the market centre. Economy, on the other hand, calls for

minimum inventory. The level of output held in stock is dictated by -

a) Transit time: If the time lapse between production and sale is longer, the level of inventory

becomes higher.

b) Sales pattern: If the pattern of sales is erratic, higher inventory levels are caused.

c) Production pattern: If the production pattern is erratic, higher inventory levels have to be

maintained to prevent stock –outs.

Assuming that the sales and production patterns are largely fixed, the important

variable, which can influence stock, levels in transit time. As transit time is reduced, the level

of static stock can be reduced with accompanying stock reduction.


3. Transit Capital – Capital can be released by changing the proportion of the total output in

transit. This can be done by adjusting the transit time. As transit time is reduced, the quantity of

goods in transit can be decreased with an associated reduction in transit inventory costs. By

realizing the capital cost of transit inventory and goods in transit, capital commitments can be

reduced, and more capital can be available for other purposes.

4. Obsolescence - When a slow or erratic mode of transport is employed, a higher level of

inventory is necessary to ensure continuous, prompt delivery to the customer. However, when

designs change rapidly, obsolescence reduces the market value of the products in store. Rapid

advances in technology bring about swifter technical obsolescence. Any goods in the pipeline

realize a lower figure when new models are introduced by a company or it’s competitors. Air

distribution can overcome this problem, and the effect of such obsolescence can be minimized.

5. Packaging – The nature of packaging of a product is often determined by the mode of it’s

transport. E.g. Because of the dry conditions of carriage, short transit times and minimum

handling, air cargo generally requires much less packaging than other forms of long distance

transport. Goods dispatched by air may require only a dust cover or even no cover at all. In

some cases, savings on the packaging of sophisticated products may more than pay for the

actual transport charges. Less packaging may lead to other advantages too. These include lower

unpacking costs and lower chargeable weight for freight.

6. Insurance – Insurance risks are based on transit time as well as the possibility of damages en

route. With faster transit times, skillful handling, substantial reduction in damage and greater

security in transit, insurance premiums tend to fall substantially.

7. Breakages – Cost of breakages is an important factor in any cost benefit analysis. Because

breakages may be indemnified by insurance companies, the true cost of damage to cargos can

easily be overlooked. In the first place, the vulnerability of various products sent by different

modes is reflected in the insurance premium. To high premiums must be added the clerical

work involved in establishing claims, making replacements and the loss of customer’s


goodwill. The replacements themselves will be subject to the same hazards and premiums will

require further documentation. Therefore, only that mode of transport must be selected which

substantially reduces real damage in transit. This calls for a selection of the routes which are

more direct and which avoid transshipment. Handling equipment must also be more

sophisticated. Containers can be used by shippers for door-to-door transportation, thereby

avoiding all handling of goods by the carrier.

8. Pilferage – Many expensive administrative problems associated with breakages also apply to

pilferage. This problem is reduced for example, when door-to-door containers are used, a fact

which is again reflected in lower insurance rates.

9. Deterioration – In many surface cargos, deterioration may be avoided only by complicated

and expensive packing to counteract mechanical shock, exposure to weather or unfavorable

temperature etc. Some cannot be stored at all, except at great expense, and others deteriorate

slowly. Deterioration can be costly in terms of packing, stock losses and expensive

conditioning in store. It can only shut the door on many distant markets. A high speed of

transport and the frequency of services can overcome many of these problems.

10. Transport Costs – Transport can be divided into 3 phases:

(i) Delivery to docks, airport or railway station.

(ii) Transport from one terminal to another.

(iii) Delivery from the terminal to the consignee’s place.

In the cost-benefit analysis of the turnaround time of a company’s delivery and

collection vehicles, their man hour costs can be significant. Some customers may find this item

to be more costly than the cost of the major journey.


Transportation Hidden Costs

The physical distribution component of a major project, including transportation of raw

materials, project materials, machinery and equipment and such infrastructure facilities as

roads, vehicles etc., usually accounts for 20 to 30% of the total capital cost. The general

scarcity of various goods, unpredictable nature of the economy and economic behavior on the

part of the business community and the bureaucracy in India make it all the more necessary for

one to plan well ahead. In fact, planning of transportation and infrastructure must be done well

ahead of general planning, so that resources spent on other parts of the project do not result in

in - fructuous expenditure.

In developed countries, these facilities are already available in abundance or are

provided for well in advance. In developing countries, action is generally initiated only after the

project has been partially put through or when it becomes totally inescapable to do so. On the

other hand, because of lack of these facilities, such problems are faced even during

construction.

Eg. Trucks get stuck in muddy roads, work sites remain unapproachable, andserious

vehicular accidents are caused near the project areas.

In developing countries, for the supervision of construction of a building, usually no

qualified individual is appointed for the co ordination and planning of transportation

infrastructure, which forms a major fraction of the total cost of a project running into crores.

For a major project, the average total cost to the economy of a project costing Rs. 100 crores

which is delayed by one year from the date of targeted completion is 39% more than the

original budgeted cost on account of the following:

1. The rate of interest on capital may be taken at nearly 12%.

2. The profit on income per year about 12%

3. The cost of depreciation on account of obsolescence or rusting without running of the plant

at 5%.

4. The cost of escalation of the project cost at 10%.


The cost of delay in the completion of the project would therefore be roughly about

Rs.11 lakhs per day or Rs. 3.25 crores per month. It would be worthwhile to educate senior

executives to recognize these facts, for this aspect of the project is usually ignored by project

authorities. Project authorities do not hold themselves responsible for the transportation

bottlenecks and resulting delays. These delays are due to non-receipt of equipment, machinery,

raw materials etc. and these delays generally run into months. Due to such delays, the project

suffers heavy losses, which occur because of congestion in the ports, traffic jams, railway

restrictions etc. Therefore, it is financially more practical to obtain critical equipment,

machinery and raw materials, critical not from the point of view of availability in the market

but critical form the standpoint of transportation bottlenecks- so that the likely delays are

avoided.

A proper transportation planning of materials, therefore, may well save a project as well

as the economy form the ill effects of wasteful expenditure. At the same time it would help

speed up production.

Transportation Network Design Options

Classical economists neglected the importance of facility, location and overall network

design Economists, when originally discussed supply – demand relationships, facility, location

and transportation cost differentials were assumed to be non existent or equal among

competitors. The number, size, geographical relationships of the facilities are used to perform

logistics operation directly affect customer service capabilities and cost.

Network design – primary responsibility of logistics. Typical logistics facilities are

manufacturing plants, warehouses, gross dock operations and retail stores. Determining

(i) How many of each facility are required

(ii) Their geographic location

(iii) The work to be performed at each is a significant part of network design.


In specific situations facility operations may be outsourced to service specialists. No matter

who does the actual work, all facilities must be managed as an integral part of a firm’s

logistical network. You have a network for internal customers, external customers as well as

suppliers. Suppliers should be made to understand what their commitment is and follow it. You

have to co-exist with your suppliers and share information with them. Network design must

take into account geographical location because a great deal of variation exists between

different geographical markets. If you set up your base in a place where your demand is high

then after a while the demand shifts and come from another location, then again you are in a

dilemma. In a dynamic, competitive environment

• Product assortment

• Customer supplies

• Manufacturing requirements

All of the above are constantly changing. However re-location of all logistics facilities at one

time is inconceivable. Relocation or redesign of specific facilities is possible. Over a period of

time, all facilities should be evaluated, to determine if their location is desirable. Selection of a

superior location network can provide the first step. Your network of facilities forms a structure

from which logistical operations are performed. Your network should incorporate

transportation and information. Specific work tasks related to network design are processing

customer orders, management of inventory, material handling.

Freight Rate Structure

Freight rates of any mode of transport are based on the following principles:

1. Freight should the actual cost of transport operation. The actual cost of operation

depends on the following factors:


a) Fixed costs - Freight should cover interest on capital, depreciation, registration and

insurance expenses of a vehicle, if applicable, general upkeep of the vehicle, administration

overheads, and expenditure on other fixed facilities, etc.

b) Semi-fixed costs - Freight should cover the salary of the driver, cleaner, conductor

and miscellaneous maintenance expenses, which vary partially with the running of the vehicle.

c) Vehicle Utilization - A transporter is interested in getting maximum mileage out of

his vehicle by moving it at top speed to cover the distance in as short a time as possible.

i. If the consignments loaded or the route covered is not conducive, the transporter

would quote a higher freight rates.

ii. Higher freight rates are also quoted when vehicles are detained at terminals either for

certain formalities, terminal congestion in busy ports or at factory gates, or while waiting for

loading or unloading operations. Terminal detentions are invariably accounted for in the freight

rates themselves, but they are normally not noticed at all.

iii. Freight rates are quoted higher if there an expectation of obtaining a return trip with

a load or if considerable empty movement of vehicles is involved after unloading.

iv. Vehicle Utilization is affected by the nature of goods. Hazardous goods that are

likely to cause damage to the other consignments or the vehicle itself attract higher freight

rates.

v. Consignments, which can be loaded less by weight in a vehicle, attract higher unit

freight rate since they yield poor utilization of the vehicle.

2. Traffic Bearing Capacity:

An age-old consideration for the freight rates is the doctrine of “what traffic can bear.”

Transportation adds place utility to goods, for it makes them marketable at another place.

However, after the addition of the cost of transport, the price of goods should be still attractive

to the buyer.


3. Public Use:

Freight rates all over the world are governed on human grounds that items of public use

should be made available to the common man at the cheapest rate. For example, foodgrains

and salt are carried at rock-bottom prices, sometimes even at those, which do not cover the

actual cost of operation.

4. Government Policies :

Freight rates are often framed on the basis of government objectives, which aim at

serving certain points – such as promotion of certain type of trade, development of certain

industries, etc. In such cases, freight rates are either depressed to promote the particular traffic

or hiked to discourage particular traffic.

5. Reasonable Profit :

The transporter must provide for a reasonable profit after covering the cost of

operations and capital investment. This margin must give not only return of investment but also

compensate him for the entrepreneurial time and effort he puts in, but also provide sufficient

funds for future development of his enterprise.

Modal Characteristics

ROAD TRANSPORT

Road transport forms an essential part of any transport activity, whether rail, sea or air.

It is essential as a supplementary and complementary mode of transport to complete movement

by other modes of transport. Eg. From one terminal i.e. the railway station the goods have to be

carried to the destination like an area by road.


RAIL NETWORK

Since olden times, railroads have handled the largest number of ton-miles. As a result of

the early establishment of a comprehensive rail network connecting almost all the cities and

towns, railways dominated the intercity freight tonnage till World War II and in some cases of

Europe, Asia and Africa they even connected the countries. This early superiority enabled

railways to transport large shipments very economically. Railroads have come a long way, as

we can see by just the US figures that 54.0% of intercity transport in 1947 was by Railways,

39.2% in 1958, 36.4 % in 1980 and almost 37% in 1992. The period from 1950-1970 saw a

tremendous decline in use of railways.

The capability to efficiently transport large tonnage over long distances is the main

reason railroads continue to handle significant intercity tonnage and revenue. Railroad

operations incur high fixed costs because of expensive equipment, right-of-way (railroads must

maintain their own track), switching yards, and terminals. However, rail experiences relatively

low operating costs. The replacement of steam by diesel power reduced the railroads’ variable

cost per ton-mile, and electrification offers potential for more reductions.

WATER TRANSPORT

It is the oldest mode of transportation. First it was the sailing vessels, which was

replaced by steamboats in early 1800’s and by diesel power in the 1920’s. Domestic water

transportation – involves the Great Lakes, canals, and navigable rivers. In every country, fewer

system miles exist for inland water than any other transportation mode.

The main advantage of water transportation is the capacity to move extremely large

shipments. Water transport employs 2 types of vessels. Deep-water vessels, which are generally

designed for Ocean and Great Lakes use, & are restricted to deep-water ports for access. In

contrast, diesel-towed barges, which generally operate on rivers and canals, have considerably

more flexibility. Water transport ranks between rail and motor carrier in the fixed cost aspect.


Although water carriers must develop and operate their own terminals, the right of way is

developed and maintained by the government and results in moderate fixed costs as compared

to railways and highways.

PIPELINES

Surprisingly, Pipelines are also one of the major form of transportation medium

throughout the world. In 1989, in USA over 53% of all crude and petroleum tonmile

movements were through Pipelines. In addition to Petroleum, other important product

transported by pipeline is the natural gas. Pipelines are owned and operated privately in most of

the countries and many gas companies act as both gas distributors and contract transportation

providers. Pipelines are also utilized for transport of manufacturing chemicals, pulverized dry

bulk materials such as cement, flour via hydraulic suspension, and sewage and water within

cities and municipalities. Pipelines are very unique in nature compared to other types of

transport, such as; they operate on 24-hour basis, seven days a week, and are limited by

commodity changeover and maintenance. Unlike other modes, there is no empty “Container” or

“vehicle” that must be returned.

AIR TRANSPORT

Air transport is the newest and the least utilized mode of transport. Its major advantage

is its speed, which is accompanied by high costs. A coast-to-coast shipment via air requires

only a few hours contrast to days taken by other mean of transportation. The high cost of

transport can be traded off for high speed, which allows other elements of logistical design,

such as warehousing, inventory to be reduced or eliminated. But still air transport remains more

of a potential opportunity than a reality because it is very much under utilized. The high cost of

jet aircraft, coupled with erratic nature of freight demand, has limited the assignment of

dedicated planes to all-freight operations. However premium carriers provide planes dedicated

for freight operations.


WAREHOUSING

Warehousing was a customer’s function conventionally anywhere in the world.

Customer to protect himself from shortages at the time of inclement weather always used to

store provisions and other utilities in his house. Consumer’s own stores were underground

cellars, smoke houses to store variety of items. Poor communication infrastructure was mainly

the cause for this storage by customer. Producers and tradesmen conveniently shrugged off

their responsibility for storage and passed it on to the customer who was left with no option.

Traditional concept of warehouse as store or godown has undergone major change now.

Warehouse is considered a value adding facility now, playing a remarkable role as a function of

logistical management.

As the times changed, manufacturer started applying modern scientific management

techniques to improve productivity in his factories. Manufacturer visualized the need of a

buffer between factory and market, now the warehouse became storehouse to stock production.

This role of the warehouse supported production.

Functions of warehouse [warehousing operations]

Receiving goods – receive and accept responsibility

1. Identifying goods – place, label, color code

2. Sorting goods- sort out the received goods for appropriate storage area

3. Dispatching goods to storage- for temporary storage with easy accessibility

4. Holding goods- security against pilferage and deterioration

5. Selecting, retrieving, packing- items are retrieved and grouped according to customer order

for dispatch

6. Marshaling goods- check the items of a single order for completeness and order records are

updated

7. Dispatching goods- consolidated order is packaged and directed to right transport

8. Preparing records and advices- of stocks and replenishment requirements


Principles of Warehouse design

Design criteria : following are the factors to be kept in mind while designing the

warehouses.

Product flow: warehouse should be designed round material handling flow. Movement

of material should be kept minimum

No of stories: one is ideal as against limitations of space. Cost of land prohibits having

only one story as this would need large area.

Height utilization: principle of cubic space, principle of ‘go vertical’, e.g.-car parking

in Japan. Limitation on this concept is posed by limitation of handling equipment, fire

safety rules, insurance regulations and rules and regulations imposed by the state.

Handling Technology

Movement continuity and movement scale economics : movement continuity is

ensuring less number of long movements rather than large number of short movements.

Movement scale economies depend on movement in large bulk. Moving material in

cases strapped on pallets or containers yields large benefits in handling. Handling

becomes standardized and simplified. Moving material in small packages is expensive

and complex. Handling technology should address these issues

Storage Plan : storage plan depends on characteristics of product. Some of the

examples are

- open air storage for bulky products

- heavy items closer to floor

- light items on higher rungs of the shelf or rack

- fast moving items in large bulk closer to aisles

- hazardous items stored at safe distances to limit damage in dangerous situations.


Warehousing alternatives

Private Warehouses

Owned or leased by the product owner. Ownership is not the criterion. Control is fully

with the product owner. Product owner exercises overall control on management. Changes can

be made to integrate the warehouse with rest of the logistical system. It provides market

presence to the product owner. It is considered to be cheaper as there is no profit to be added to

the cost.

Public Warehouses

It is available to companies on hire. Overheads get distributed over a large customer

base. This makes the usage cheaper. As warehousing is their core business public warehouses

offer expertise in management. Flexibility of location : if the product owner needs to change

the location of warehouse, it is easier if the current warehouse is public. It is only a question of

terminating the contract and starting a new one. But if the warehouse is owned, one has to

dispose off the current facility and procure a new one. Significant scale economies, several

users and resultant volume, benefits in transportation costs can be gained by utilizing these

facilities.

Contract warehouses

Contract warehouse operators take over logistics responsibility from manufacturing

company. Warehouse owner offers long term relationship and customized service. Product

owner gets the benefit of management expertise of the warehouse owner. As the warehouse

owner centrally controls several warehouses, product owners get the benefit of shared resources

with several clients. This brings down the cost.

General classification of Public warehouses

1. General merchandise

2. Refrigerated

3. Special commodity


4. Bonded

5. Household goods & furniture

Warehousing strategy

Strategy in this context is finding answers some fundamental questions about

warehouses keeping long term business in mind. These questions are product owner should

have how many warehouses in the logistical network? Where these warehouses must be

located? And what type of warehouses is suitable for the business we are in?

How many? Total logistical cost must be calculated keeping various number of warehouses in

the logistical warehouses. If a graph is plotted with total logistical cost on Y axis and number of

warehouses on X axis, shape of the curve would indicate number of warehouses required for

minimum total logistical cost.

Where?

Location considerations: While deciding the location following factors are to be considered

keeping potential locations in mind.

1. Cost of distribution to market area.

2. Transport requirement and facilities.

3. Cost of transportation.

4. Presence of Competition.

5. Availability and cost of utilities [power, water, gas, sewerage disposal] and cost

6. Availability and cost of labour supply.

7. I - R climate, labour productivity. Whether conditions are conducive to operations.

8. Customer’s expectation of ‘D’ for our product.

9. Any specific commitments made by the company to any ‘A’ category customer.

10. Local taxation levied by the local authority in the area.

11. Community attitude towards business from outside.


12. Restrictions associated with warehouses. In some areas some type of products are not

permitted to be stored.

13. Future expansion. Whether the location is able to accommodate organizations plan to

expand in future as per their strategy.

14. Cost of land.

15. Topography and soil condition: if the warehouse needs special and heavy equipment for

material handling and if the incoming loads are heavy then firm soil and flat topography are

ideal. If these conditions are not available, substantial amount of money is required to be

invested.

16. Possibility of title change to the land: Are the title change formalities straight forward? In

some situations this is complex, like title to MIDC land.

Ideal warehouse location

1. Protects of stock against moisture, insects, dust, fumes, pests, thieves, fire etc.

2. Provides facilities for ware housing activities like plenty of water for drinking and fire

fighting.

3. Facilitates economics of operation.

4. Away from sources of detrimental conditions.

5. Easy access from highway, railhead and waterfront. No geographic barriers. There are

no natural barriers like river or steep hills

6. Proximity to ‘A’ category customers.

Warehousing strategy Of what type? Private? Contract or Public?

Private Contract Public

Presence synergy

Industry synergy


Operating flexibility

Location flexibility

Scale economies

Presence synergy : a private warehouse provides strong market presence to a company. This

has a psychological impact on the customers and also provides physical presence close to the

customers for prompt response to customers.

Industry synergy : if several firms serving the same industry collocate themselves benefits in

transportation cost result. These firms can share several facilities specially products handled are

same.

Operating flexibility : management control is full in a private warehouse.

Location flexibility : change in location and increase or decrease in number of warehouses is

very simple if public warehouses are used. This is important for seasonal demands.

Scale economies : high volume handling results into benefits due to economies of scale. This

can happen when highly capital intensive handling equipment is used. Public warehouses can

invest in technology as they serve a large client base.


A Case Study On

BLR INDIAThe Company

Set up as a small trucking business in 1968, by a visionary Mr. LC Goel, BLR has

shifted gears to become one of the largest & most reliable Transportation & Logistics


companies in India. From a one man in one office in 1968, the company grew steadily to a

sizeable business of about INR 2 crores and three offices by 1989.

1990s saw the spurt of growth in BLR as the company grew from an INR 2 crores in

revenues from three offices to 120 crores (INR 1.2 billion or USD 27 million) out of a network

of more than 50 offices all over India at present. The Company has moved up the ladder

through innovation & consolidation and today with a 450-people strong family, BLR has

become one of the most sought after Transportation & Logistics companies in India. The

inspiring fact is that it is well endorsed by the customers nationally.

With a fleet of more than 250 vehicles including trucks, trailers & LCVs and with a

network of warehouses in major cities in India, BLR offers a truly integrated Logistics Services

to its customer. Custom Bonded-warehousing, bonded-trucking and excise bonded

warehousing are additional unique features of BLR's offerings to complete the bouquet of total

Logistics Services.

BLR is committed to service the customers by offering complete logistics & supply

chain solutions. In order to facilitate this, BLR has promoted BLR Logistics to cater to the

Logistics / Supply Chain requirements of the customers. BLR Logistics is being led by

professionals with varied corporate backgrounds and rich industrial experience.

A Brief History

Mr. L.C. Goel (affectionately called LCG), a self-made man, a great visionary of

strong values, started a small trucking business in the 1968. His short-term goal was to


establish a road transport business between his native place and the commercial capital of India.

The company was very aptly named Bombay Ludhiana Roadways, catering to the

transportation needs of the customers in these stations and the stations en route.

With his able leadership and great vision, LCG nurtured the nascent organization into

an India wide Transport Company catering to the very need of the customers nationally.

Quality, Integrity and Social responsibility are the values that he practiced, preached and

imbibed in the culture of BLR.

In line with his mission, he had grown the business steadily to about INR 2 crores by

1989. By that time, the 2nd generation had already been groomed to take the reigns of the

business. Mr. Ashok Goel, a Commerce Graduate from Mumbai University, joined the Family

business in 1985 started by his father Mr. L C GOEL.

Through his able leadership, he has transformed BLR into an INR 120 crores company

with a network of more than 50 offices spread across the length & breadth of the country.

Ashok is an active member of various developmental industry bodies & associations like

Indian Road Transportation Development Association (IRTDA),

All India Transport Welfare association (AITWA) &

Bombay Goods Transport Association (BGTA)

He is actively involved in industry regulations necessary for the development of the

transport infrastructure in the country.

Company Profile and Key StrengthsAs one of India's leading logistics companies BLR offers customized solutions to all industrial sectors with a focus on saving costs and providing world class services. BLR Logistiks (I) Ltd


stands for globally competitive solutions within a trusting and service oriented environment. BLR offers truly integrated Logistics Services to its customers through its privately owned fleet of more than 500 vehicles and over 24 general and custom bonded warehouses in all major cities across India.With its 100 offices in India BLR can offer you an extensive network and overall coverage. Having grown 58% annually, and Reliance Capital Ltd taking on an equity stake of 31%, BLR Logistiks (I) Ltd has developed from a small trucking company to a 250 crore rupees (equal to 50 million US Dollars) turnover logistics provider.

Mission, Vision and Values

Our mission is to create competitive edge and superior financial results for our customers by optimizing their supply chains through innovation & total commitment.

We will be recognized globally as the number one provider of logistic services offering door-to-door solutions from, to and within India.


INTEGRITY EQUALITY AMBITION

HONESTY RESPONSIBILITY TRUSTWORTHINESS

\

At BLR Logistiks Ltd

integrity and trustworthiness are the basis of our commitment to our customers and employees. BLR allocates tasks and responsibilities to its staff based on their capacities regardless of other factors such as sex or religion. BLR values a strong culture of loyalty towards its employees and from its employees. These values form the backbone of BLR and will continue to provide the framework to realize BLR’s potential and ambition in the future.

The Infrastructure

The Infrastructure of BLR consists of the following :

1) Office Network


2) Fleet

BLR Office Network

BLR has a network of more than 50 offices around the country. The offices are

well networked through latest IT capability. The network of offices covers all the major

business districts of India.

BLR Fleet

With a fleet of more than 250 vehicles including Trucks, Trailers and LCVs,

BLR has the capability to carry all types of goods for transport within India. The profile


of BLR customers varies from Global MNCs, Indian MNCs, Indian Corporate house,

Start Trading house, Trading houses and Importers & Exporters.

The industries and the products that BLR caters to currently include

pharmaceuticals, Chemicals, Lubricants, Engineering, Automotive, Electronics, News

Print, Papers, Fibers, Polymers, Steel, Project machinery, Plant & Equipments, odd

dimensional cargo and Import & Export containers.

With thorough knowledge of Indian Transport regulations, customers trust BLR

and entrust with responsibilities to deliver goods in time, every time.

BLR Supply Chain Solutions


BLR provides the following services in its supply chain :

1) Transportation Services

2) Warehousing

3) Distribution

4) International Freight Management

Transportation Services

BLR has the capability to provide Transportation to all kind of material within India.

The broad line segmentation of Transportation Services is as below:

Domestics Transportation

Bonded Trucking

Project Transport

Scheduled Transport

Multi Modal Transport

Customised Transport (Milk run, Hub & Spoke etc.)

Domestics Transportation

Transportation is the movement of people and goods from one place to another.

Domestic transportation refers to the movement within the country. Transportation is the most

visible of all functions of logistics and high contributor to logistics cost. We can see trucks,

containers and wagonloads of material being moved from place to place as an activity directly

associated with trade and business. We should also appreciate that this is an activity that adds

highest amount of cost to the activity of making inputs and outputs available to consumers.

Transportation function moves the products to meet customer expectations at minimum cost.


Bonded Trucking

Bonded Transportation provides same-day or

next-day delivery of anything from an envelope to a

truckload. BLR has been approved by CONCOR

(Container Corp of India), a PSU of Govt. of India, to

operate bonded-trucking services within India and is

one of the few transportation companies in the panel of

Concor to offer this service. BLR has been given this

approval by CONCOR after a due diligence on the capability, security and quality parameters.

Multi-Modal Transport

The BLR Group believes in the concept of a `Multimodal Transport System' and hence

with the help of the various units namely BLR Logistics, a variety of audiences demanding

any / all of these modes of transportation are been addressed.

The Cargo Industry is still an expanding market. The need for a comprehensive logistics

systems in transportation, communications and information sector, continues to grow. Freight

forwarding services alone are no longer sufficient, special deals are to be initiated on regular

intervals to lure the customers to maintain them on permanent status, especially to cater to the

increasing needs of seasonal vendors.

This is with the object to provide most economical, smooth, reliable and speedy

carriage of shipments to various destinations on selected mode of transport which must not only

ensure hassle-free service but should render sizable savings in the freight expenses. This vital

information of costing must arrive to the shipper well in advance to make proper planning in

co-ordination with logistic company. This is essential in order to ascertain reliable and timely

transportation scheduling and delivery throughout the logistic-chain, from the shipper to the


consignee.

Therefore, the cargo market demands a global solution and network linking all four modes of

transportation i.e. (a) Air (b) Road (c) Rail & (d) Sea. The combination of these modes is

defined as ‘Multimodal transport system’.

BLR Warehousing & Distribution

The range of warehousing services currently offered to the customers are following;

Bonded Warehousing (Custom Bonded & Excise Bonded)

General Warehousing (for all industry types)

Export Stuffing Warehousing

Export Vendor Consolidation

BLR Bonded Warehouses

BLR is Govt. approved Custom-bonded warehouse operator within India and is

operating Custom-bonded and Excise Bonded warehouses around the country. BLR is also

adding 50,000 sq ft state-of-art bonded warehouse space in New Delhi to the existing network.

An Excise-bonded warehouse of 20,000 sq ft is also being planned for export container

stuffing at Mumbai and Ludhiana by Q1, 2006.

BLR General Warehouses


BLR offers warehousing and distribution services to its customers. With a warehouse

space of more than 100,000 sq ft and with a strong transport network around the country, BLR

has the capability to provide integrated logistics & supply chain services to its customers in

India.

BLR International Freight Management

BLR through its logistics services entity does the complete program

administration for the International Freight Management. In the recent past, the customer's

demand gave rise to the development of a forwarding system in which the designated forwarder

provided, arranged and assumed responsibility for the whole transportation process from

storage, consolidation, packaging, transportation, insurance and custom clearance.

Air Export & Import Freight Management

Ocean Export & Import Freight Management

Project Transportation

Services Offered by

BLR

BLR can meet in-bound and out-bound logistical needs to enhance business

efficiency.

In-bound logistics

1. Material movement from suppliers to warehouse


2. Palletising, if required

3. Sub assemblies & kitting - if required

4. JIT supply

5. Return of defectives

6. Packing, Unpacking

7. Stock reporting

8. Payment Collection

Outbound Logistics

1. Storage of finished gods

2. Movement till it reaches customers

3. Invoicing

4. Payment collection

Functions of BLR INDIA

1) Freight forwarding

At

BLR,

Freight


Forwarding is a well defined, planned and executed service function. Offering a very strong

local network and a comprehensive global reach, it brings to each client the assurance and the

satisfaction of dealing with a professional logistics management group. Responsible for this

service at BLR is a close knit team of experts who are well informed and well versed with the

intricacies of managing and delivering a complete range of logistics solutions across multiple

surfaces. The team has also initiated and carried forward many mutually beneficial movement

management partnerships nationally and internationally, which has translated into quick, wider

and cost effective access to all markets.Today, the service has evolved to cover a variety of

shipments, offering a wide choice of destinations and provides the perfect match between cost

and time schedules.

2) Project handling

At BLR, project handling is a core function and one of the main service

strengths of its comprehensive portfolio. This service has evolved from its

startup status in the year 1948, to become a real powerhouse solution

provider to a variety of industries today. BLR since inception has focused

on really building up this facet of its service. It has over the years given

due emphasis to every minute detail to add edge to this service and deliver

more value to all its clients. Attention to detail, accurate and quick paperwork, close and

continuous co-ordination with government officials, constant monitoring of movement, trained

staff at ports, a complete understanding of national and international processes, full range of

handling equipment, all these are the hallmarks of this service. Topping this, is the fact that

given the scope and the number of projects that BLR handles, it can really offer visible cost

benefits to its valued clientele plus a delivery quality that guarantees minimum delays, total

safety and adheres to time bound schedules. Today, with the support of trained personnel, a

range of fully functional movement equipment like cranes, trucks etc and a rich and varied

experience BLR has to its credit the successful management and delivery of prestigious

projects for leading Sugar mills, Textile mills, Fertilizer plants, Cement plants, Power plants


and White Goods projects India. No wonder, the company's reputation as a dependable and

reliable project movement partner is growing by the day.

3) Logistics management

Today, BLR is totally geared up to deliver to all its

clients a very strong and complete service back up in terms

of comprehensive logistics solutions. It has created a value-

driven portfolio and this has been further bolstered by

building a support team of professionals, a national and

international network and also a pro-active response and technology system. Today, it

competently handles and enables the speedy clearing and forwarding of a variety of industrial

and customer import and export consignments. From loading at ports, unloading, dispatch,

warehousing etc it can handle and deliver consignments of every shape and size across national

and international borders.

4) Customs clearance

Since the inception of the company in 1968, BLR

Transport has been into Custom Clearance. With the vast

knowledge of custom procedure, we have been handling

customs procedure to post-clearance jobs for various

clients. We also have cleared goods within one working

day. The knowledgeable workforce that we have is one of

the best one can find. As always, the customers have been their priority and this will always

hold.

5) Trucking


This facet forms a very specialized aspect

of the BLR service portfolio. Being focused on the

logistics management business it was with

foresight that it steadily invested in and built up a

fleet of vehicles. Today, BLR owns a fleet of

trucks which it deploys to move and manage consignments speedily across national borders.

These trucks are well maintained and driven by knowledgeable and well informed drivers who

are instructed to drive carefully to ensure “zero damage” to consignments during transit. These

trucks are serviced from time to time and checked regularly so as to ensure that they stay in

prime working condition and no breakdowns happen during delivery. BLR uses this fleet to

transport and deliver its own consignment and it also at times gives these trucks on hire to the

industry.

6) Door to door

BLR has created a very clearly focused and value driven

door-to-door service. This service encompasses the entire

national network and places a strong emphasis on timely

delivery, in good condition and with true value for money

service. The service today is available across India and

has steadily built up a reputation for being very reliable. It

is used by a variety of clients from various businesses both big and small and with the strong

infrastructure of vehicles, warehouses and offices that BLR has created, the service has evolved

to set new standards in terms of cost and delivery parameters.

7) Warehousing

BLR warehouse service supports inbound logistics,

distribution and aftermarket services in a way that improves

inventory management, reduces total operating costs and


improves cycle times. Their facilities offer the customers warehousing that is fully integrated

into the wider supply chain and meets demanding service levels. This encompasses the design

implementation and operation for both dedicated and multi-user sites. The benefits include

improvements in :

Customer service levels

Stock accuracy

Lead times

Redundant stock costs

Productivity responsiveness to a company's strategic needs

Warehousing & 3 rd Party Logistics

Being in the logistics industry it was only logical for BLR that investing in warehousing

formed a very vital part of growing the business and expanding the service portfolio. To this

end BLR has made very prudent and strategic investments in creating a chain of warehouses,

set up close to vital transport hubs and outside octroi limits. These warehouses are well

maintained, well staffed and are secured by vigilant round the clock staff. Huge in size, well

ventilated and clean they are used for the storage of both consumer and industrial

consignments. These warehouses have helped to add a competitive edge to the BLR portfolio

as they have served to give the BLR customer that sense of security during transit and also

reduced the chances of damage during storage. This service has served to push BLR up the

value chain considerably.

Warehouse Management Systems

The Warehouse Management System (WMS) records all events and actions in the

receipt, handling and storage of products and orders in a warehouse environment. The WMS

also accurately records the location of inventory whilst stored in the warehouse.


BLC Prologs that WMS manages all critical processes in the warehouse, and is also an

important support for varied transport and distribution concepts (planning, time controlling,

booking of transport capacity, communication with customs and other authorities).

Cross Docking

Cross-dock operations are facilities where shipments are received from one mode of

transport and transferred to another mode, or where shipments complete one leg of a journey

prior to commencement of another journey. Shipments are consolidated or deconsolidated.

Product received into the facility is not taken into inventory.

Through effective inventory management, inefficiencies can be driven out of the supply

chain, overall costs reduced and high service levels achieved. BLR optimises inventory at a

line-item level at every stage of the supply chain.

They focus on driving results in:

Supplier management

Expediting

Order replenishment

Demand forecasting

Safety stock setting

Order pipeline monitoring

Excess stock management

Inventory optimisation is supported by inventory management software that calculates

'line item risk profiles' that measure the variability of demand and supply for each line item

within a customer's inventory.

They can offer:


Average of 20% inventory reduction and 8% improvement in product availability

Reduced inventory and overhead costs

Improved sales, profitability and return on investment

High service standards

Better matching of supply with demand

More streamlined and responsive supply chain

Bonded Warehousing

Bonded warehouses provide secure environments in which customers' products can be

held without immediate payment of local duties and taxes. BLR takes over and manages the

warehouse activities, either in dedicated or multi-user sites.


Case Study

Ocean Import/Export Freight ManagementBLR can handle all your international shipments. We negotiate best rates for you and provide the documentation necessary for the shipment. We compare all shipping lines and deliver your shipment all over the world.

Air Import/Export Freight ManagementBLR ships your cargo to all major airports in the world. Our contacts with the Airlines and expertise within the company makes sure that your cargo gets delivered in a fast and timely manner.

Custom Clearance ServicesCustoms procedures require specific countrywise expertise. BLR offers this expertise and provides you with all the proper documentation for clearing of your cargo in India, both import and export. Our agents, located globally, have a thorough knowledge of the procedures in their respective countries and will assist in clearing the cargo all over the world.

Cosmetics Company in Pune

Previous situation :The customer was using conventional 9MT and 16MT trucks, in which respectively 7MT and 10MT of cargo was loaded. The truck was covered with Tarpaulin and lashed with ropes. Main destinations were in Eastern India and the customer was using a transit time of 6-7 days. By the time the cargo arrived at Kolkata from Pune the top layer of the cargo was totally damaged due to the ropes used for lashing. This resulted in loss of cargo and therefore loss of sales.


Solution provided by BLR :

To reduce the damage to the cargo, BLR designed and built a 32ft container vehicle with 15MT carrying capacity and GPS tracking facility. The customer was able to load 15MT and therefore used full capacity of the trucks and thus reducing the amount of vehicles previously required.

The transit time of the cargo also got reduced from 6-7days to 4 days and the customer no longer lost cargo due to damages. BLR’s solution increased efficiency and reduced the customers cost.

Hydraulic axels

Semi - Low Bed trailers

LCV’s

MCV’s

32ft containerized vehicles (6 and ten wheels)

28ft containerized vehicles

12 wheel trucks, open and full body

Full Body Truck (18-20-22-24 ft)

Open Body / 24ft Container

Half Body, Open, 20ft Container Carrier

20ft Container Carrier (only frame)

High Bed Trailer with frame (20 and 40 ft)

High Bed Trailer with platform (20 and 40 ft)

44ft Low Bed Trailer

20ft HQ Container

44ft Low Bed Trailer

20ft Double Axle Trailer

40ft Triple Axle Trailer


Secret of BLR Success

BLR has gained success in providing services because of the following criteria’s :

1. Focused Management.

2. Planned Expansion.

3. Professional Manpower & Business Integrity.

The Other Factors are as follows :

1) Communication capabilities

BLR uses Highway Vehicle Tracking System, Advanced Computer & Communication

technology to link its network of branches nation wide. The highly developed computerised set-

up provides excellent support for its clients across the country connected by phone, fax & e-

mail services all over the country.

2) Dedicated people

BLR Human Resource pool includes trained, skilled & semi- skilled work force and

professional managers who are motivated and committed, they are ever alert and strive hard to

maintain a high services standard for total customer satisfaction.

3) Specialised in Import Consignments

BLR is specialised in door to door Cargo movement from the port to the final

destination. The loss caused to their clients due to non-supply of vehicles on time results in

demurrage & detention charges.

BLR has successfully handled consignments of 10,000 Metric Tonnes to be cleared a

given time frame. Their field staff has been provided National Roaming Communication

facilities to keep our customers well informed of the movement of their consignments. No


matter whether it is a small parcel or a big consignment BLR assures that it will be delivered on

time and safely.

4) Quality at BLR

BLR is an ISO 9001:2000 certified company. BLR has a quality policy in place which

ensures that each member of the BLR family complies with the set quality norms. All the

processes that we undertake have an internal quality standard. Even our drivers are ensured to

be compliant with the norms set forth for safety, security and quality. The processes are

thoroughly monitored and regularly audited.

5) BLR IT Capability

BLR has a dedicated in-house team of professionals to manage the IT systems. BLR is

using various modes of technology to support the business. All the offices are linked through

the email network. BLR uses Highway Vehicle Tracking System, Advanced Computer and

Communication technology to link its network of branches nation wide. Online tracking system

is in place for tracking the movement of trucks and shipments. BLR is committed to invest in

leading-edge IT capability to support the gamut of logistics services offered and to give a real

time TRACK & TRACE visibility to the customers. They use TRAKO as a tool which

enhances their IT capability even further.

Trako provides real-time vehicle and cargo location and operating information with accuracy

and reliability. This information can be easily retrieved via

internet, mobile phone or a call center. Trako uses the

following technologies to deliver one integrated solution:

Global Positioning System (GPS)

Wireless communications (GSM/ RF)

Geographical Information System (GIS) i.e. digitized maps

Global Positioning System (GPS)


The Global Positioning System (GPS) is a satellite-based navigation system consisting

of 24 Satellites placed into orbit by the U.S. Department of Defense. GPS was originally

intended for military applications, but in the 1980s, the system was also made available free for

civilian use.

GPS satellites circle the earth twice a day in a

very precise orbit and transmit signal information to

earth. GPS receivers take this information and use

triangulation to calculate the asset's exact location.

Essentially, the GPS receiver compares the time a signal

was transmitted by a satellite with the time it was

received. The time difference tells the GPS receiver how

far away the satellite is. A GPS receiver must be locked on to the signal of at least three

satellites to calculate the asset's position details in terms of latitude and longitude and track

movement. With four or more satellites in view, the receiver can accurately determine

Wireless communications (GSM/ RF)

BLR uses wireless communications such as GSM which is a cellular network, denotes that

mobile phones connect to it by searching for cells in the immediate vicinity. Radio frequency

identification (RFID) is a method of remotely storing and retrieving data using devices called

RFID tags.

Geographic Information System (GIS)

It is a system for capturing, storing, analyzing and managing data and associated

attributes which are spatially referenced to the earth. In the strictest sense, it is a computer

system capable of integrating, storing, editing, analyzing, sharing, and displaying

geographically-referenced information. In a more generic sense, GIS is a tool that allows

users to create interactive queries (user created searches), analyze the spatial information, and

edit data. Geographic information science is the science underlying the applications and

systems, taught as a degree program by several universities. BLR makes effective use of this


technique to co-ordinate various activities throughout the delivery process for making it

beneficial to the customers as well as the company.

How trako works?

Step 1: Location/ time information of vehicle is received by the device from GPS satellite.

Step 2: Device sends this information using GSM network through SMS or GPRS to the

central server.

Step 3: The trako application software, residing in the control station, generates reports/ alerts/

maps.

Step 4: The reports/ maps are available online through trako web application.

Step 5: The fleet manager views the vehicle on the map and receives the vehicle status over

internet. He can talk to the driver as necessary through 2-way communication facility.

Step 6: Alternately data on the location, speed and time can be accessed by the user through a

mobile phone query or through the call center.

Step 7: As and when required, fleet manager can poll data at the click of a button.

The asset's position details in terms of latitude, longitude and altitude determined, the

GPS unit can calculate other information, such as speed and distance on an ongoing basis.


Customer Benefits

Cost effective processes and solutions – BLR endeavors to save cost at each process

rather than jacking up artificial costs. They implement ABC (Activity Based Costing) of

each stage by closely monitoring process time, resources deployed, service levels achieved

for Transport, Storage, Order processing, Invoice Generation, Picking, Packing and Local

Distribution for optimization of Total Supply Chain Costs.

Professional approach and handling, creates a congenial atmosphere easy to tune up with

MNC and Big Corporate Customers way of working and thinking. It is like having your

own dedicated department.

Rich and long Experience of wide array of industries which ensures application of best

methods for product handling, documents / information flow. This simply means

productivity improvement at economical cost.

Transparent working, no hidden costs in warehouse rentals, transport costs, loading /

unloading costs which is like working towards a common goal of cost reduction on

Logistics activities.

Financial soundness & Stability - due to the interest in manufacturing companies,

Overseas Trading Office, Membership of Stock Exchanges. This means finance never

becomes a stumbling block with future growth of business in additional Security &

infrastructure improvements.

Adoption of new technologies - In tune with vision of Companies, BLR is ready to invest

and adopt new technologies like Bar Code Scanners.


Customers


Awards

"National Trade Excellence Award" –

Reflects the excellence in BLR way of working.

"SAMAJSHRI" Award –

Reflects the commitment of BLR towards the social responsibility

Appreciation Awards from AIMTC –

All India Motor Transport Congress on March 2005

Appreciation awards CEAT Award indain road Transport

2010

Annual SME & Entrepreneurship Excellence Award 2008


Conclusion

With a fleet of more than 250 vehicles including trucks, trailers & LCVs and with a

network of warehouses in major cities in India, BLR offers a truly integrated Logistics Services

to its customer. Custom Bonded-warehousing, bonded-trucking and excise bonded

warehousing are additional unique features of BLR's offerings to complete the bouquet of total

Logistics Services.

BLR has the capability to carry all types of goods for transport within India. The profile

of BLR customers varies from Global MNCs, Indian MNCs, Indian Corporate house, Start

Trading house, Trading houses and Importers & Exporters. The Company has moved up the

ladder through innovation & consolidation and today with a 450-people strong family, BLR has

become one of the most sought after Transportation & Logistics companies in India. The fact is

well endorsed by the customers nationally.

BLR is committed to service the customers by offering complete logistics & supply

chain solutions. In order to facilitate this, BLR has promoted BLR Logistics to cater to the

Logistics / Supply Chain requirements of the customers. BLR Logistics is being led by

professionals with varied corporate backgrounds and rich industrial experience.

A Snap-shot of the Telematics Industry in India

With about 3 million trucks on the road, the logistics market in India is estimated to

constitute around 13% of the GDP. As companies realize the need to be more competitive and

cut costs, the vehicle tracking systems or e-logistics market in the country is set to take off in a

big way. Though the numbers may not look impressive at present-only an estimated 30,000


commercial vehicles have tracking systems-various industry estimates put the growth to be in

the range of 50-100% for the next five year

Annexure

Articles

‘BLR is a step behind multimodal transport’

We are a step behind in multimodal transport, and we've willingly opted for it," rues

Mohan Menghani, Executive Director, BLR India Pvt. Ltd. "Many multinational companies are

assigning us the contracts to deliver their cargos at the Indian end. Probably they wouldn't have

appointed us if we would have been a multimodal transport operator, " he adds.

"Moreover, India is on the verge of being the most competitive. It's tough for multinational

companies to survive. They've to outsource their jobs," says Menghani. In today's competitive

world it's hard for companies to be full-fledged. For instance, at some point of time, they may

fall short of some or the other delivery vehicle. Also, the cost of operation is too high, so no

one can afford to take the risk of calling back transportation vehicles empty, he reveals.

The Mumbai-based BLR offers customised transport solutions carrying all types of goods such

as project machinery, plant and equipment, new print, fibre, polymers, lubricants, electronics,

steel, pharma, and export-import containers to private, public and government organisations.

The company also offers exports (by road) to Benapole (Bangladesh) with custom clearance

and providing logistic solutions wherever required.

The company is constructing a warehouse at Dronagiri, near JNPT, with an investment

of Rs 50 lakh. Regarding problems, Menghani points out that diesel prices have been increased.

RTO is the biggest problem for the industry, and it accounts for around 1.5 per cent of our

expenses, he highlights.

In certain states, they encourage overloading, but in other states overloading is not


allowed. There is need for uniform practices in all the states. The government is very well

aware that infrastructure has to be improvised. The company is into warehousing and

transporting, but is geared to do shipping and clearing also.

Among various orders, one has a contract of around Rs 1.25 crore from Reliance to

transport polycarbonates from their factories to dealers. CWT Distribution Ltd, a Singapore-

based company hired the services of BLR India to deliver defence equipment to the military

depots near Nashik and Agra. Some of the prestigious clients of the company are GAIL (India)

Ltd and Jindal Vijaynagar Steel Ltd.

Established in 1964, under the name Bombay Ludhiana Roadways. by L.C.Goyal,

BLR's turnover was Rs 700 million on March 31, 2004, and is expected to cross Rs 900 million

during the current financial year. BLR has nationwide branches with its own fleet of vehicles. It

has warehouses at Bhiwandi, Kalamboli, Nhava-Sheva and Masjid.

Transportation is yet to bloom properly, says Menghani. About 15-20 years back,

margins were good in the transportation industry. The company is equipped with e-tracking

system, truckhoj.com for online tracking of BLR vehicles plying throughout the country. With

efficient resource planning, the company is geared to deliver the product at the right time, in

right quantity and at the right place.


BLR India plans ware-houses in Mumbai

The infrastructure facility in India is not world-class, and professionalism or

transparency is not seen in the logistics industry, which makes for slow growth rate of this

industry, rues M. Menghani, Executive Director, BLR India Pvt. Ltd. He is in favour of

abolishing toll tax at multi-points as it is a hindrance to smooth movement of traffic, and if

government lacks funds let them increase road tax. Apart from that there is also a lot of

harassment from RTO officials, complains Menghani.

BLR provides complete logistics services like custom clearance and forwarding,

warehousing, custom bonded warehousing, transport, distribution and is gearing to provide

multimodal transport as well. The company plans to put up one-of-its-kind, state-of-the-art

large warehouses, spread over 20 acres in proximity to Mumbai and JNPT. It will cater to the

needs of large industry to store import/export consignment, packaging/distribution, stuffing and

de-stuffing of containers. It will also have facility for of cold storage for fresh fruit and edible

products, and custom bonding as well. "We have located the land and are in the process of

developing its infrastructure. It will start operation in the next six to eight months," Menghani

says.

Currently, the company has a number of warehouses in and around JNPT, covering

approx. 30,000 sq. ft. of covered area, and 10,000 sq. ft. of custom bonded warehouse in

addition to 30,000 sq. ft. open warehouse for large equipment storage. Meanwhile, he said,

"The latest trends in the logistics industry is supply chain management. We've made a

beginning that needs refining as we lag in smooth movement of material as well as

communication. Secondly, there should be outsourcing of logistics services, which is not

possible till we have good warehouses."


Some of the valued clients include Reliance Industries, Lee & Murhead, Jindal Group,

Maersk India, BHEL, L&T and Birla Copper. The company has achieved Rs 531 million sales

in the first six months and is targeting over Rs 110 crore for the current year.— Rahul Kamat

BIBLIOGRAPHY

PRIMARY DATA

Mr. Sanjay Rane enabled me to understand the BLR INDIA operations. This project would not

have been possible but for the support and co-operation extended by him. This is gratefully

acknowledged.

SECONDARY DATA

BOOKS

1) Logistics & Supply Chain Management – ‘Strategies for reducing cost and improving Service’

by Martin Christopher.

2) Logistical Management – Donald Bowersox

3) ‘Supply Chain Management’ by Sunil Chopra and Peter Meindi

WEBSITES

1) http://www.blrindia.com/

2) http://www.blrlogistics.com/

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