indian logistics industry 100106

8/8/2019 Indian Logistics Industry 100106

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100106 N.Viswanadham

AchievingGlobalCompetitiveness

TheLogisticsWay

Offers A Rich

logistics

Variety


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lobalCompetitiveness

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ContentsContents

Logistics- Global scenario

Advantage India

State of Logistics in India

Opportunities In India

Manufacturing

Agriculture

Service Health care

Infrastructure building

Conclusions


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Logistics: Global ScenarioLogistics: Global Scenario


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Manufacturing : Past and FutureManufacturing : Past and Future

Technology has been at the root

of the Industry revolution over

the last century.Global Markets and e-Commerce

Global Reach/Global Impact


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Global Manufacturing Network

Supplier Distributor

Supplier Retailer

Manufacturer

ServiceProvider

Information Network

Enterprise System or

Web-site

Logistics Network

Logistics Hub

Financial Network

Banks

Supply Network

Service Network

Demand Network


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Convergence to Global Manufacturing NetworksConvergence to Global Manufacturing Networks

Assembly

Automation

Factory

Floor

Automation

Airport,

Seaport,

DistributionCentre

Automation,ASRS

CAD/CAM/CAE

LAN, ERP

Paper-based, Human Interface

Collaborative SCP

Marketplace Embedded SC

Machine

Controllers

Cell

ControllersFactory

Controllers

WMS,

TMSB2B

Controllers

Internet, E-mail, Electronic Marketplaces,

Purchasing, Marketing Department

CRM, SRM

Software-based Relationship Management

Agents

GMN

Relationship Automation

Information Automation

Control&Supervision

Automation

MaterialFlow

Automation


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The Global BusinessThe Global Business

ScenarioScenario

Global Customer

Global Manufacturing: No Product produced in onecountry or by one company

Outsourcing to LCCs gained pace

Vertical Integration to Network of Companies

Material, Information and Funds need to movedacross continents

Competition is defined by efficiency,synchronization, and competencies in the network


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The Three CirclesShares of World GDP, 2004Shares of World GDP, 2004

North America

31.2%

(PPP 26.5%)

Western Europe

28.7%

(PPP 21.9%)

Asia Pacific

28.9%

(PPP 34.7%)


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Global Value ChainsGlobal Value Chains

Information Flows

Material Flows

Distribution(US, EU, Asia)

Manufacturing(China)

Raw Materials(Australia)

R&D (US)

IT (India)-Finance (US, EU)


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Advantage IndiaAdvantage India


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India the 4India the 4thth largest economy in the worldlargest economy in the worldPPP adjusted GDP of US$3trillionPPP adjusted GDP of US$3trillion

9.8

5.1

3.22.9

2.1

1.4 1.4 1.4

0

2

4

6

8

10

12

United

States

China

Japan

India

Germany

Italy

United

Kingdom

France

(US$ tn)

Source: World Bank


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Advantage IndiaAdvantage India

One quarter of the worlds youth live in India

54% of the Indian population is less than 25 yrs of

age

2nd Largest English speaking workforce

Focus on Higher Education, Supportive government

policies

Second largest pool of technically qualified

knowledge workers

IPR laws in place

Developing Industry base

MNC

R&Dc

enters

in

India


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IT and R &D are India's Star industriesIT and R &D are India's Star industries

There are more IT engineers in Bangalore (150,000) than

in Silicon Valley (120,000). McKinsey, predicts that IT services and back-office work

in India, will swell fivefold, to a $57 billion annualemploying 4 million.

General Electric, Microsoft, IBM, Cisco, Intel, GeneralMotors, Astra Zeneca, Motorola , Texas Instruments haveR&D centres

Biotechnology is a new hot spot.

Reliance Life Sciences is recognised by the USNational Institutes of Health for stem cell research.

The best-known Indian pharma R&D companies

Ranbaxy, Dr Reddys Labs, Sun Pharma et al. Revolution spread from Computer software to design-

intensive manufacturing to R&D


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TheLogisticsWay The State of Indian LogisticsThe State of Indian Logistics


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IndiaIndia -- Economic Sectors SnapshotEconomic Sectors Snapshot

GDP US $ 692 billion [PPP 3.1 Trillion] 10th largest economy and 4th in PPP terms

Contribution toGDP

Work ForceEmployment

Agriculture 21% 60%

Manufacturing 28% 17%

Service 51% 23%

Logistics costs are 10-20% of GDP

In US it has come down from 15% - 9.8% Very high in developing countries (20% in China)


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CrossCross--Country Logistics Cost ComparisonCountry Logistics Cost Comparison

80%11.37%Japan

30%-40%10%Europe

57%9.9%US


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Elements of Logistics costElements of Logistics cost

Transportation 35%

Inventories 25%

Losses 14%

Packaging 11%

Handling and Warehousing 9%

Customers' shopping 6%


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Accenture: Supply Chains in Asia: Challenges and Opportunities

Logistics In Asia Pacific

Excellent Infrastructure

Sophisticated capabilities and

technology

Easier to attract quality labor

Supply chain partners

Processes and infrastructure thatsupport collaboration

Traditional channelsModerate Infrastructure

Medium IT penetration

With no integration

Poor Facilities and InfrastructureLow IT penetration

Industry partners limited


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Logistics Infrastructure in IndiaLogistics Infrastructure in India

Logistics involves global movement of materials,

information and funds from country to country Requires excellent state of the art country infrastructure

airports, sea ports, Internet and other related facilities

Indian Infrastructure is poor as compared to developedand developing countries and is rated 54th among the 59countries Road : 56/59, Rail: 25/59, Seaport: 51/59, Airport: 40/59

The underlying institutional problems Fragmentation and overlapping of responsibilities among various

government agencies

Complexity of international trade documentation process and lackof IT infrastructure

Complex tax laws

Lack of professionally competent logisticians

Industry readiness: weak asset or system management skills


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RoadwaysRoadways National Highway Development Project (NHDP), US $13

billion, 1998-2007 .

Four/six laning of the highway connecting Bombay,

Delhi, Calcutta and Madras

North-South and East-West corridors (NS-EW),

Kashmir to Kanyakumari and Silchar to Porbandar.

The end to end transport process to be optimized by

controlling loading densities through packaging and

palletizing standards, and loading and unloadingfacilities automation.

Slow speeds, traffic congestion, high wear and tear of

vehicles are some of the problems


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AirAir The air cargo consists of express mail, computers, chips,

electronics and optical equipment, precision instruments

and perishable foodstuffs. The six major airports carry 88% of the total air cargo

Privatization the major airports, airlines is a popular

headline

Delhi

30%

Madras

11%

Bangalore

16%

Calcutta

12%

Trivandrum

1%

Bombay

30%

Delhi

32%

Calcutt a

4%Bangalore

7%

Trivandrum

4%

Madras17%

Bombay

36%

International air cargo traffic Domestic air cargo traffic


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Indian RailwaysIndian Railways During 2000-01, the IR carried

473.5 million tones of freight Rs23,305 crores ( 69%)

89% of its freight is commodities like coal, fertilizers,cement, petroleum products, food grain, finished steel, iron oreand raw material to steel plants.

4,833 million passengers, Rs 10,515 crores (31%)

High Density Network (HDN) connecting Bombay,Delhi, Calcutta and Madras Carries 65% of the total rail freight traffic and 55% of passenger traffic.

Concur is the Flag ship route

Freight is moving away from IR although cheaper


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SeaportsSeaports

Vast coastline of 7,517 kms handles 95% of foreign trade

12 major ports and 184 other (minor and intermediate) ports

Traffic in major ports : 2002-03 - 313 million tonnes

Private sector participation is talke about

7.20Calcutta

8.48Ennore

13.00Cochin

13.30Tuticorin

21.43New Mangalore

23.65Mormugao

23.93Paradip

26.53Bombay

26.83JNPT*

28.55Haldia

33.70Madras

40.63Kandla

46.00Visakhapatnam

Traffic handled (million

tonnes) 2002-03Major Port


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Third Party logistics players in Indiain India

Market is highly fragmented with large number of smallplayers

Rail is state run while truckers are often family-run

Complex business environment, eg. tax rates differbetween provinces, cultural differences

Poor warehousing and transportation infrastructure

Foreign logistics competitors are Exel, Danzas, BaxGlobal, TNT, Panalpina main revenue from freightforwarding

Logistics market is expected to grow by more than20% over the next 3 years as against the present rateof 12-15%

Source : Scope, Indian Logistics Industry, January 2002


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Opportunities In IndiaOpportunities In India


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Opportunities In IndiaOpportunities In India

Leverage the IT & R &D advantageLeverage the IT & R &D advantage

It is essential for India to increase its proportionof Global GDP through growth in all the threesectors of the economy

Planned or wild, growth is essential andimportant. This could be through attracting

MNCs to India or through Indian companiesbecoming MNCs and raising funds through

NASDAQ or large number of small companiesraising capital from international venturesources


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IndiaIndias Share of Industry is Very Lows Share of Industry is Very Low

Vision 2020


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Global Competitiveness inGlobal Competitiveness in

Manufacturing is a National ImperativeManufacturing is a National Imperative

75% of India s working population (600m)has education middle school or below

Only Labor intensive manufacturing can generateemployment in adequate numbers

Experience of Europe, America, Japan, theTiger economies, and now China shows thatWealth creation is possible only through

International trade oriented manufacturing

In China manufacturing sector, constitutesnearly 40% of the GDP.


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Foreign Direct Investment (FDI) in IndiaForeign Direct Investment (FDI) in India

FDI is welcome in all the sectors, except for

defence, railways and atomic energy

FDI inflows : US$ 3.73 billion in 2002-03 and to

US$ 3.57 billion in 2003-2004

Amount of FDI Inflows into India (1997-2004)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

Year (April-March)

BillionUS$


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Indian component manufacturers will move up the valuechain as contract manufacturers Frost & Sullivan has estimated that the revenue of the logistics

industry from the manufacturing sector alone was $13.46 billion in2003, and the market is likely to grow at a rate of6.2% during thenext five years

Strategic location of industries and B2B connectivity tomarketplaces

The increasing online sales will force e-companies to forgestrategic alliance with logistics service providers India can expect a shift in the retail logistics, B2B procurement

practices and the way the distributions are handled Adoption of new technologies such as GPS and RFID will

take place rapidly

Future Trends in Manufacturing IndustryFuture Trends in Manufacturing Industry


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Website

Assembler

Estimated

Time of

Delivery

Order

Processing

System

Customer

ConfiguredOrder

Suppliers

Logistics Service Providers

Warehouse

Global Transportation & Logistics

Industry Supply ChainIndustry Supply Chain


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Leverage IT In Logistics software DevelopmentLeverage IT In Logistics software Development

Indian companies can exploit this strength to developspecific capabilities in IT-enabled Logistics

development and management of logistics planning andcoordination systems.

develop in to 4PL s for global manufacturing and serviceindustries with logistics domain knowledge.

develop automated trade systems such as Trade Net andDigital Trade Transportation Network for tradedocumentation and customs permit applications.

Develop Real-time control & Event Management usingRadio Frequency Identification Tags (RFID) and Web-Services


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KBLP Business ModelKBLP Business Model

Supplier 2 & 3 PLsContract

Manufacturer

Execution

KBLP

Planning, Coordination and Overall Responsibility

CustomerOrders

Operational

Status

Plans

Material Flow

Payment

Service


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IndianIndianRetail IndustryRetail Industry

Restriction on FDI

Accounts for

8% employment and 13% of GDP

Consumer spending has grown at 11.5% per year

India ranks 5th amongst 30 emerging retail markets in DCs

Top cities for retail growth : Bombay, Delhi, Banglore

andPune, smaller cities : Nagpur, Indore, Jaipur, Chandigarh,

F&B, groceries, consumer durables and home products are

promising sector

The organized apparel segment is expected to grow at 9.5%

per annum in the next three years

Consumer Spending Habits

Food &

Beverage

48%

Others

23%

Transport &

Communication

13%

Rent, Fuel &

Power11%

Clothing &

Footwear5%


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e-Choupal

EE--ChoupalsChoupals Farmers- increased income, lessmiddlemen Farmers exposed to

ITC processing facilities Specifications for international

markets

International quality certificationprocesses

Shipment requirements for exports,

The documentation and otherrequirements at the farm level

Use of moisture meters and portableelectronic weighing machines

ITC trained farmers (VendorDevelopment) in specificharvesting, processing, grading, andquality standards and providedguidance on export protocols


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TheThe AgriAgri SupplySupply

ChainChain Agriculture provides 30%

of GDP and 60% of employment

The chain is long and slow

A supply chain study for rice would involve

farmers, seed producers, fertilizer factories,

financial institutions, millers, government,

warehouses, fair price shops, retail shops,

railways, truck transport companies, etc.

Orders of magnitude gains are possible if youapply the Industry supply chain ideas here


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The Agri-Supply Chain -Fertilizers

Location of Facilities

Inventories

Multi-modal Transport

Country Warehouse

Regional WarehouseLocal Warehouse

Factory


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Indian Food Service IndustryIndian Food Service Industry

McDonaldsMcDonalds-- IndiaIndia

The Indian foodservice industry grew by 4.4% in2004 to reach a value of $4.8 billion.

Mcdonalds is one of the successful MNCs in thisarea Indianised on several fronts

products: Mac Maharaja

purchases more than 96% of its supplies from Indiansuppliers.

Restaurants are constructed using local architects

contractors, labor and with maximum local content inmaterials.


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Service Chains Provide

Immense Opportunities

Arise in different contexts Food processing

Health Care

Construction

Finance

Defense

Distribution and retail

Manufacturing Returns handling

Spare parts and MRO

Product Life Cycle Management Closed loop supply chains

Reverse Logistics Transportation

Containers

Window of Opportunity


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Logistics for Large Infrastructure and

Engineering Projects

India is focusing on infrastructure

a wave of projects such as the construction of

airports, seaports, industrial parks and national

highways.

These can be completed in time and budget

through proper logistics management and

coordination of various activities.

Business strategy to develop infrastructureand Industry simultaneously


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SupplyChainEffortsCutLeadTime70%Ownerenterslong-leadsupplychain,holdsinventory

MappingHelpsUncover

SCInefficiencies

Mappingacrossorganizational

boundariesforpipesupports,

contractordiscovers96%

ofelapsed

timeis waittime, only4%isvalue

addtime

IntelCutsFa

bConstructi

onfrom36t

o18months

Conservativeapp

roachindicates$

30MMinventory

savings

Construction SCM HeadlinesConstruction SCM Headlines

In the case studies w e observedIn the case studies w e observed


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Health Care LogisticsHealth Care Logistics

Healthcare services involve coordinationbetween multiple parties of doctors,hospitals, pharmacists, medicalequipment manufacturers, etc.

These interactions and processes arelogistics-based.

For example, In clinical trials, drugs and

patient samples are exchanged betweenmultiple patients and research institutes.


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Coordinate Disease ManagementCoordinate Disease Management

AIDS Management

Patients

Hospitals

Pharmaceutical

Companies

Research

Institutes

Government

Agencies

Voluntary

Organizations

World Health

OrganizationPhilanthropists

like Microsoft

Networking and Coordination ofdifferent players

Multi-lingual Call Centers

Counseling

Information

Diagnosis and Monitoring ofPatients

RFID tags, Internet

IT support

Clinical Trials

Where

aret

he

Logisti

csPla

yers?


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ProjectProject -- Health CareHealth Care


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Some RecommendationsSome Recommendations Balanced Investment between IT and Physical

Infrastructure

Development of selected Vertical Industry Clusters Agriculture/Food Cluster

Manufacturing Clusters such as Automotive and Pharmaceuticals.

Fast Moving Consumer Goods Cluster.

Development of selected Logistics Sectors Global

Interstate

Retail

Think Radical: 80% of the products are made for 20% ofpeople

Produce goods for the 80% of population: requires some timespackaging solutions, some times new product development, etc.


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Center ForCenter ForCenter For

GlobalGlobalGlobal

Logistics &Logistics &Logistics &

ManufacturingManufacturingManufacturing

StrategiesStrategiesStrategies

ThankyouThankyou

indian logistics industry 100106

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