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Prospects of containerized logistics in India

Summer Internship Project 15 May 15 July 2012 At

kanpur

Under the guidance of:


Mr. Prem Prakash (Terminal manager, ICD Kanpur)

Submitted by:
Amod Kumar Yadav MBA (IB) III Semester, FMS, BHU

Acknowledgement

The satisfaction, which accompanies the successful completion of the project, is incomplete without the mention of a few names. I take this opportunity to acknowledge the efforts of the many individuals who helped me make this project possible. I would like to express my gratitude to the Terminal manager Mr. PREM PRAKASH, CONCOR ICD Kanpur for providing me an opportunity to work in CONCOR ICD Kanpur and make it a very memorable moment. I would also like to express my heartfelt appreciation and gratitude to my project head Mr.Anil Kanaujia, Junior Executive, ICD Kanpur. This project is a result of his teaching, encouragement and inputs in the numerous meetings he had with me, despite his busy schedule. He made sure that my stay in the office was a learning experience. I would also like to thank all other departmental members for their constant support, continued encouragement and guidance throughout my training period. Finally, I would like to thank my Institute FMS BHU for making this experience of summer training in an esteemed organization like CONCOR possible. The learning from this experience has been immense and would be cherished throughout life.

AMOD KUMAR YADAV

PREFACE

A project is a scientific and systematic study of real issues on a problem with the application of management concept and skills. The study can deal with small or big issues in any division of an organization. It can be case study where a problem has been dealt with, through the process of management. The essential equipment of a project is that, it should contain scientific collection of data, analysis and interpretation of data leading to a valid conclusion.

Summer Training is an essential part in MIBA curriculum. It enables the student to share the real experience in the corporate world. My summer training is in Container Corporation of India, ICD Kanpur, Uttar Pradesh for the period of eight weeks.

The topic of my project is Prospects of containerized logistics in India

I hope this study will contribute to the organization.

Table of contents

1. Executive summery 2. Industry profile 3. Company profile 3.1 3.2 3.3 3.4 3.5 Core business Vision and mission Objectives Functions ICD Kanpur at a glance

4. Research methodology 4.1 4.2 Research objective Research plan

5. Literature review 5.1 Future of logistics: The Indian scenario 5.2 Prospects of containerized logistics 5.3 Prospect of growth of CONCOR 6. 7. 8. 9. Findings Suggestions Limitations Bibliographies

1.

Executive summary

Logistics is the management of the flow of resources, not only goods, between the point of origin and the point of destination in order to meet the requirements of customers or corporations. Logistics involves the handling, integration and packaging, of and

information, transportation, inventory, warehousing, material often security.

The report describes the logistics industry and the current scenario of logistics with special reference to the containerized logistics industry, the current position of concor in the containerized logistics sector in India and the future prospects of containerized logistics industry in India. CONCOR's core business is characterized by three distinct activities that of a carrier, a terminal/CFS operator, and a warehouse operator and as an Inter-modal logistics service provider, with the expansion of trade and increase in the significance of containerization concor is aiming to become a 3pl service provider in India The main objective is to study the scope of containerized logistics in India with the help of secondary data collected from various websites magazines and reports, to analyze the recent trends and to project the future demand with the help of these. The secondary objective is to analyze the efforts of concor to tap the emerging demand of containerized logistics service in India

2.

INDUSTRY PROFILE

Logistics
Logistics is the management of the flow of goods and other resources between the point of origin and the point of consumption in order to meet the requirements of consumers. Logistics involves the integration of information, transportation, inventory, warehousing, materialhandling and packaging. Logistics is a general concept, which has different definitions for different industries. We can also define logistics as a business planning framework for the management of material, service, information and capital flows. It includes the increasingly complex information, communication and control systems required in todays business environment. During the past decade, a large number of practitioners in many fields have already identified that in the complex business setting they have to consider the impacts of other organizations while making any decisions to improve their own performance. As a result, the logistics is extended to the management of supply chains involving diverse channel members (e.g., suppliers, manufacturers, distribution centers, retailers, etc.). Since the channel members affect one another, supply chain (logistics) management (SCM) represents a set of management processes, with an emphasis on the coordination for supply chain improvement. HISTORY OF LOGISTICS The birth of Logistics can be traced back to ancient war times of Greek and Roman empires when military officers titled as 'Logistikas' were assigned the duties of providing services related to supply and distribution of resources. This was done to enable the soldiers to move from their base position to a new forward position efficiently, which could be a crucial factor in determining the outcome of wars.

Triggering intense competition, globalization, coupled with liberalization, forced both private and public firms to commit themselves to making available to their customers the right material of right condition, at the right time and place at the lowest cost be it a product or a service. According to the Council of Logistics Management Logistics is the . . . process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of conforming to customer requirements. The Container logistics industry comprising of Inland Container Depot (ICD) and Container Freight Stations (CFS) is among the fastest growing segments in the Indian logistics sector. Growth in international trade coupled with the rise in containerization levels in India are the major factors driving demand for CFS and ICDs. The market is valued at approximately INR 65 bn is expected to grow strongly due to the constant demand generated by importers and exporters for specialized services. Size of the Logistics Market in India: Indian Supply Chain and Logistics Industry is more than USD 100 Billion in size and is the backbone of Indian Economy. Our industry is growing at a rate of 8-10% annually and logistics has been a crucial contributor in the growth and development of the Indian economy. In the near future, Traditional Logistics services like Transportation and Warehousing would continue to grow at a good rate. However, the big ticket growth would come from the Value Added Logistics services in the near future. A Strong Foreign Direct Investment inflow is expected in the Indian markets, which would lead to increased market opportunities for providers of Third-Party Logistics in India. Therefore, India possesses substantial opportunities for growth in the Supply Chain & Logistics industry in the coming years, notwithstanding the temporary jolt due to the economic slowdown. India's current share in global trade is around 0.8 per cent and is expected to increase to 1.6 per cent by 2012. Robust growth in foreign trade will increase the demand for good quality and timely logistics and warehouse services.

Recent Trends In Logistic: The global logistics industry was valued at US$3.5 trillion in 2007, whereas US logistics industry size was around US$900 billion, 25% of the global logistics industry. Logistics costs in India are estimated to be around 13% of the GDP, which comes to around US$94 billion. However, Indias spending on logistics industry is much higher than the developed economies like the US (9.5%) and Japan (10.5%).

Containerization An increasing popular method of shipment is containerization. A container is a large box made of durable material such as steel, aluminum, plywood and reinforced plastics. A container varies in size material and construction. Its dimension is typically 8 foot high and 8 foot wide lengths usually varying. A container can accommodate most cargo but is most suitable to packages of standard size and shape. Containers can take case of most of 4 main packing problems. Because of container construction, a product does not have to have heavy packaging, it gives protection against: i. Breakage

ii. Moisture iii. Temperature controlled iv. Pilferage and Theft

History of containerization Prior to containerization, all cargoes other than bulk commodities were moved piece by piece. Boxes were loaded one by one on to a truck, which drove to the port, once at the dock each box was individually unloaded and then hoisted into the hold of the ship. At the discharge port the same process was repeated in reverse. Not only was this means of freight handling slow and piece-meal, other modes of transport such as rail basically added to the inefficiency as

the cargo had to be man handled all over again. Also, the cargo was often exposed to potential damage and pilferage. Then one day in 1936 the question was put forward "Wouldn't it be great if my trailer could simply be lifted up and placed on the ship without its contents being touched?" Such a logic come from an American chap named Malcolm McLean but it wasn't until 20 years later that the first ship carrying containers, sailed from Newark New Jersey. The year was 1956. At that time, vessels were able to carry 226 boxes in "trailer ships" which conformed to the maximum length for trailers allowed on the US highways: 35ft long x 8ft wide x 8ft high. Later the standard size agreed upon became the 20ft and 40ft units still in use today. This meant that any box could lock onto any other trailer, ship or other container.

containerization of total cargo (in %)


25 20 15 10 5 0 2000-01 2005-06 2001112

container growth in million TUE's


10 9 8 7 6 5 4 3 2 1 0 2004 2006 YEAR 2008 2010

m TEU's

Types of Containers Container units form the most integral part of the entire shipping industry, trade, and transport. These shipping containers are the structures that store various kinds of products that need to be shipped from one part of the world to another. As such, depending on the type of products to be shipped or the special services needed from them, container units may vary in dimension, structure, materials, construction etc. various types of shipping containers are being used today to meet requirements of all kinds of cargo shipping. Some of the most common types of shipping containers in use today are mentioned below. 1. Dry storage container

The most commonly used shipping containers; they come in various dimensions standardized by ISO. They are used for shipping of dry materials and come in size of 20ft, 40 ft and 10ft.

2.

Flat rack container

With collapsible sides, these are like simple storage shipping containers where the sides can be folded so as to make a flat rack for shipping of wide variety of goods.

3.

Open top container

With a convertible top that can be completely removed to make an open top so that materials of any height can be shipped easily.

4.

Tunnel container

Container storage units provided with doors on both ends of the container, they are extremely helpful in quick loading and unloading of materials.

5.

Open side storage container

These storage units are provided with doors that can change into completely open sides providing a much wider room for loading of materials.

6.

Double doors container

They are kind of storage units that are provided with double doors, making a wider room for loading and unloading of materials. Construction materials include steel, iron etc in standardized sizes of 20ft and 40ft.

7.

Refrigerated ISO containers

These are temperature regulated shipping containers that always have a carefully controlled low temperature. They are exclusively used for shipment of perishable substances like fruits and vegetables over long distances.

8.

Insulated or thermal containers

These are the shipping storage containers that come with a regulated temperature control allowing them to maintain a higher temperature. The choice of material is so done to allow them long life without being damaged by constant exposure to high temperature. They are most suitable for long distance transportation of products.

9.

Tanks

Container storage units used mostly for transportation of liquid materials, they are used by a huge proportion of entire shipping industry. They are mostly made of strong steel or other anti corrosive materials providing them with long life and protection to the materials.

10. Car carriers Car carriers are container storage units made especially for shipment of cars over long distances. They come with collapsible sides that help a car fit snugly inside the containers without the risk of being damaged or moving from the spot.

11. Intermediate bulk shift containers These are specialized storage shipping containers made solely for the purpose of intermediate shipping of goods. They are designed to handle large amounts of materials and made for purpose of shipping materials to a destination where they can be further packed and sent off to final spot.

12. Drums As the name suggests, circular shipping containers, made from a choice of materials like steel, light weight metals, fiber, hard plastic etc. they are most suitable for bulk transport of liquid materials. They are smaller in size but due to their shape, may need extra space.

13. Special purpose containers Not the ordinary containers, these are the container units, custom made for specialized purposes. Mostly, they are used for high profile services like shipment of weapons and arson. As such, their construction and material composition depends on the special purpose they need to cater to. But in most cases, security remains the top priority.

3.

Company profile

CONCOR

THINK CONTAINER THINK CONCOR Container corporation of India Ltd. (CONCOR), incorporated in March 1988, commenced operation from November 1989. CONCOR has expanded its terminal network to a total of 58 container depots, comprising of 19 pure EXIM, 30 combined (EXIM + Domestic) and 9 pure domestic terminals. In addition to providing inland transport by rail for containers, it has also expanded to cover management of port, air-cargo complexes and establishing cold chain. It has and will continue to play the role of promoting containerization in India by virtue of its modern rail wagon fleet, customer friendly commercial practice and extensively used information technology. The containerization and inter-modals are the by-products of this era of the globalization.

3.1 Core Business

CONCOR's core business is characterized by three distinct activities that of a carrier, a terminal/CFS operator, and a warehouse operator and as an Inter-modal logistics service provider. In the area of domestic business door pick up and door delivery services are the most popular. We also use our terminal network to plan hub and spoke movements that allow single customers to move cargo to multiple locations at a single time, with CONCOR taking care of the distribution and re distribution requirements. The key value CONCOR offer is the provision of a single-window facility coordinating with all the different agencies and services involved in the containerized cargo trade, from Customs, Gateway Ports, and Railways, to road haulers, consolidators, Forwarders, Custom House Agents and shipping lines. To achieve a high degree of customization, CONCOR offer packages designed to provide the most cost-effective combination of road and rail. This enables CONCOR to offer services which can be individually tailored to every customers specifications, minimizing customers own efforts. 3.2 Vision and Mission OUR MISSION IS TO JOIN WITH OUR COMMUNITY PARTNERS AND STAKE HOLDERS TO MAKE CONCOR A COMPANY OF OUTSTANDING QUALITY. WE DO THIS BY PROVIDING RESPONSIVE, COST EFFECTIVE, EFFICIENT AND RELIABLE LOGISTICS SOLUTIONS TO OUR CUSTOMERS THROUGH SYNERGY WITH OUR COMMUNITY PARTNERS AND ENSURING PROFITABILITY AND GROWTH. WE STRIVE TO BE THE FIRST CHOICE FOR OUR CUSTOMERS. WE WILL BE FIRMLY COMMITTED TO OUR SOCIAL RESPONSIBILITY AND PROVE WORTHY OF TRUST REPOSED IN US.

3.3 Objective of the CONCOR To be result oriented, driven by performance, customer focused To provide the consumers with the value of their money The productive utilization of resources to be maximized To provide very high services to the consumers To be the benchmark in the standards of the service provided To monitor and seek for better opportunities in providing services that are innovative To set targets to support the mission and the objectives of the company To work as a dedicated team to reach the highest level of excellence To follow the values and ethics of the industry To provide all round development for the country

3.4 Functions of the Container Corporation of India:

To provide cost effective, reliable, responsive, efficient logistics solutions to the consumers To be the first choice among the customers To be result oriented organization

Multi -Model Transport Facilities CONCOR provides the concept of international multimodal transport covers the door-todoor movement of goods under the responsibility of a single transport operator. The company was set up with the objective of developing multi modal logistics support for India's International and Domestic containerized cargo and trade. The task was to provide customers with the advantages of direct interaction and door to door services that formed the backbone of road transport, while capitalizing on the robust and more economical option of rail Movement on the Indian Railways network.

Various Multi Modal Transport Facilities As CONCOR is a multi-model logistic service provider

Inter-modal Transportation System Used This is the use of one or more than one mode of transport to move a shipment to its destination. Container Corporation of India uses this in an efficient way. Variety used is road and rail in the case of organization. Referring to Global trade, this is the only option as factories and markets may not be next to ports. Inter-modal transportation helps reduce cost in operation that cannot be matched by single mode. Essentially it is very convenient for shippers as well as consignee.

Future prospects CONCOR is basically concentrated on their customer thats why its a major player in a multi model transport. The container traffic in India has grown at a CAGR of 15% since 1991, 2.5 times the average GDP in the same period. With the growth of external trade being faster than GDP, the similar trends are expected to continue in future as well. Similarly the possibilities of growth in container traffic in the Domestic sector are immense with continued strong trends in growth of GDP and the need of the industry for value added services. Logistics ports, large cargo hubs will be the requirement of the industry in very near future, as large retail chains generate the demand for professionally managed cargo delivery systems.

There will be a need for CONCOR to adopt different strategies for growth in the changed external business environment due to opening up of Rail sector for container train operation for 15 other players. More emphasis will be required on providing total logistics and transport solutions to its customers by seeing the possibilities of expanding the presence of the company in all the segments of the transport value chain in the Exim as well as Domestic segment. Possibilities are to be explored for strategic alliances, both for optimal utilization of infrastructure as well as expansion into other.

According to Crisil, The container traffic is estimated to grow at a CAGR of 24% over the next four years. CONCOR is the market leader (market share 94% in terms of volumes) in the container rail operations and with its extensive network of 58 terminals and 8558 wagons, low cost of operations and strong expansion plan, is well-placed to capture a major share of the container traffic.

CONCOR terminals and their regional distribution


Northern India eastern india western india 0% 23% 8% 15% 31% central india southern india total 61

23%

KEY PERFORMANCE PARAMETER OF CONCOR

Parameter Throughput (TEUs) Total Income Gross Margin Profit After Tax

2009-10 24,21,247 ` 3885.73 cr `1141.69 cr ` 786.69 cr

2010-11 25,62,297 ` 4000.02 cr ` 1196.03 cr ` 830.10 cr

total 61, 0

Exim pure, 17

combined, 32 domestic pure, 12

Trends in business of CONCOR

CONCOR share in overall container movement

2008-09 Carried by IR Carried by CONCOR 29.66 24.36

2009-10 34.36 26.60

2010-11 36.86 27.75

(%age share of IR traffic)


Carried by other CTOs

(82.13%)
5.30

(77.41%)
7.76

(75.28%)
9.11

(%age share IR traffic)

(17.87%)

(22.59%)

(24.72%)

3.5 Inland Container Depot (ICD) Kanpur Inland container depot juhi railway yard kanpur became operational 29.9.2000 Kanpur. Container Corporation of India Ltd. (CONCOR) acts as custodian of the goods at ICD, Kanpur. The facility for movement of Containers is available between ICD, JRY, Kanpur and all Major Ports and Air Ports and vice versa. The trans-shipment of Containerised Cargo to ICD, JRY, Kanpur from all major ports and vice versa is by rail and road. Staff at ICD Kanpur is 15 employees

Facilities provided at ICD Kanpur Customs Clearance Transportation Warehousing

Functions: i. . Taking account of the perishable or hazardous nature of the goods, cost transit time and security. ii. Arranging appropriate packing. Taking account of climate, climate, terrain, and weight, nature of goods and cost, delivery or warehousing of goods at their final destination. iii. Obtaining, checking and preparing documentation to meet customs packing specifications and compliance with overseas countries regulations and fiscal regimes.

AREA DETAILS OF ICD KANPUR

Land under rail track Paved area alongside the (rail handling track) Stacking area paved or unpaved Internal roads Area for trucks/trailers parking Container repair area Handling equipment repair and maintains Area occupied by weigh bridge Warehouse Building of all kind Land left unused for future development Total

4979 sq mtr 16242 sq mtr 13396 sq mtr 914 sq mtr 9820 sq mtr 104 sq mtr 200 sq mtr 116 sq mtr 2000 sq mtr 1296 sq mtr 45984 sq mtr 97980 sq mtr

ICD KANPUR SWOT ANALYSIS

Strengths

Weakness

Skilled labor

manpower ,availability of skilled Low work productivity Low investment in R$D Centralized data system Facilities are less available

multi model transport facilities Provide services at a lower cost Provides a one platform for all services opportunities New six sigma logistic

Threats management Private ICD and CFS are giving

technique is available Booming logistic sector Opportunities in 3PL services

competition Value added services at better cost in private sector CTOs Customer relationship management

Software used by CONCOR CONCOR is has its own software which was first initiated in 2003, and time to time some amendments are done according to the requirement. All the transactions are automatically

updated to the server at corporate office. There are different types of software used for different activities which are as follows ETMS (Export Import terminal management system) This software is used for ISO containers. In this system all export and import transactions are done codes are generated for all the parties, shipping lines, CHAs For different terminals and ports different codes are there. DTMS (Domestic terminal management system) This software is used for domestic containers. In this system only domestic transactions are recorded and different codes are generated for domestic containers. OPERATION SYSTEM In this system all the information regarding train placement, Inward WTR and Outward WTR are prepared. It also keeps track of train and all the information about trains is available in this system. Duty and Procedure for Export (ICD Stuffing)

Issue of carting order Issue of gate passes for loaded vehicles In gate

Issue of job order for unloading the cargo Unloading of cargo and preparation of unloading tally sheet Examination of cargo Issue of stuffing job order Booking of stuffed container Generation of IW Bill

Duty and Procedure for Import

Filling of IGM at ICD Book delivery of container Filling of Bill of entry by CHA/Importer with custom

Processing of documents Examination of cargo Seal cutting of import container Destuffing the Imported container Issue of custom out of charge by custom for removal of cargo Collection of CONCOR charges and Issue of gate pass

Facilities Provided By CONCOR Custom clearance Stuffing-De stuffing Warehousing facilities Loading unloading facilities multimodal transport facilities

Major trading countries 1. Australia

2. China 3. Brazil 4. England 5. France

Equipments used at ICDs Reach Stacker (Till machine) Sealing crane Rubber tier gentry Rail mounted gentry Forklift

Source of earning of CONCOR 1. Freight 2. Handling 3. ground rent

Freight charges from CPC to Port

TEUS 20

CPC- JNPT/NSICT/GTIL Up to 12T >12T- 20T

AMOUNT 18400 21200

>20T- 27T >27T

29300 33100

40

Up to 18T >18T-24T >24T

35400 37500 39500

Freight rent + (10% service tax on 30% of freight +2%cess + 1%c cess) Ground Rent Charges for Empty Containers

DAYS 1-7 DAYS 8-15 DAYS 16-30 DAYS

Rs PER TEUS 60 90 110

FROM 31 ONWARDS 160 Loaded Ground Rent Basically when the imported goods come to the ICD 2 days are given to unload the cargo {if

any holiday occurred in between then ( 2+h )} Days 4 days Next 6 days Rs 250 per TUES 400 per TUES

7th day onwards

600 per TUES

Charges for Factory Stuffing

Rate=Km + Weight (slab rate) a. If empty container is send for factory stuffing but returned empty Charges: 75% of one way empty and one way loaded b. If it is both way loaded Charges: 125% of one way empty and one way loaded

Container Corporation of India limited ICD Kanpur Major commodities From date: 01/01/09 < --------Export -------- > to date: 31/05/09

Commodity description 20 TEUS 40 TEUS Total TEUS Buffalo meat Scooter Carpet 0 9 55 402 209 153 804 427 361

Aluminum sheet Strippen Towels Leather footwear Bags Machine Finished leather

209 172 2 94 18 40 112

0 1 84 38 74 45 7

209 174 170 170 166 130 126

Number of TUEs handled in ICD Kanpur

FY 2011-12 MONTH ETY APR MAY JUN JUL AUG SEP OCT NOV 324 384 491 514 486 489 383 285 1020 1064 1263 1252 1400 1514 1259 1358 EXPORT LDD 663 698 795 684 1023 649 886 1012 LDD 894 796 1002 1263 1002 893 740 1072 IMPORT ETY TOTAL THRUPUT 2901 2942 3551 3713 3911 3545 3268 3727

DEC JAN FEB MAR TOTAL

462 634 582 632 5666

1441 1347 1280 1412 15610

1076 927 650 558 9621

1083 1343 1172 909 12169

4062 4251 3684 3511 43066

ICD Kanpur revenue

ISO MONTH APR MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEB MAR TOTAL COLLECTION FY. 2011-12 (INR)
42948440.00 46662166.00 50803109.00 50414526.00 57971202.00 61601425.00 51560712.00 62996714.43 60718913.20 66848827.84 61035950.91 65942764.65 679504751.03

COLLECTION FY. 2010-11 (INR)


43186052.00 47365182.00 52265159.00 48514783.00 55516075.00 47338999.00 46773377.00 38107924.72 51936457.44 47318491.49 46737411.44 50165388.62 575225300.71

VARIATION IN COLLECTION (%)


-0.55 -1.51 -2.88 3.77 4.24 23.15 9.28 39.51 14.46 29.22 23.43 23.93 15.35

MONTH APR MAY JUNE JULY AUG SEP OCT NOV DEC JAN FEB MAR TOTAL

DOMESTIC COLLECTION COLLECTION FY. 2011-12 (INR) FY. 2010-11 (INR)


1120159.00 1165248.00 3508344.00 3640692.00 5603414.00 4402069.00 11818098.00 5323004.60 3370599.00 3411231.15 61563.00 53976.00 43478397.75 1930772.00 755407.00 54100.00 812285.00 1278278.00 898307.00 133732.00 1936641.00 551067.00 5803262.00 25176.00 2852732.00 17031759.00

VARIATION IN COLLECTION (%)


-72.37 35.17 98.46 77.69 77.19 79.59 98.87 63.62 83.65 -70.12 59.11 -5185.19 60.83

Remarks: Ever highest collection Rs 7.02 crore during Jan 12

Operations Activity

Train Placement Unloading Loading

Agencies involved in international business or Import export


Transport agencies Service agencies Terminal agencies Government controlling agencies Surveyor Shipping line CHA

Abbreviations

ICD CFS FCL LCL XL IL IGM

Inland Container Depot Container Freight Station Full Container Load Less Than Container Load Export Loaded Import Loaded Import General Manifest

EGM Export General Manifest CHA ODC EIR OTL Custom House Agent Over Dimensional Consignment Equipment Interchange Register One Time Lock

4. Research methodology

4.1. Research objective:


The Project was undertaken to fulfill the following objectives: To have an insight about the containerized logistics sector. To study the prospect of containerized export/import logistics. To identify the different sector where there is a prospect of growth. To identify the different sector for growth of CONCOR

4.2Research plan:
The flowchart of my research plan is as follows:

Study of Containerized Logistics Sector: an overview

Overview of the various elements and factors present in containerized logistics sector

Analysis through secondary data the prospects of growth of containerized logistics sector in India

Analysis of the issues from the point of view of, industry and CONCOR individually

Conclusions & Recommendations

. Research Design: The project was a research project. Primary as well Secondary data was used. The research design was a descriptive cum analytical research design. Primary data was collected with the help of questionnaire with the help of freight forwarder, Exporter, Importer and CHA. Secondary data was collected from the websites of various companies and survey agencies, journals, magazines and news papers. Duration: Two months

5.Literature review

5.1 Future of Logistics - The Indian Scenario:

Despite problems, The Indian logistics industry is growing at 20% vis--vis the average world logistics industry growth of 10%. Since the organized sector accounts for merely 1% of the annual logistics cost, there is immense potential for growth of the sector. The major Opportunities are highlighted below.

Many large Indian corporate such as Tata and Reliance Industries have been attracted by the potential of this sector and have established logistics divisions. They started providing in-house logistics services, and soon sensing the growth of the market, have started providing services to other corporate as well.

Large express cargo and courier companies such as Transport Corporation of India (TCI) and Blue Dart have also started logistics operations. These companies enjoy the advantage of already having a large asset base and an all-India distribution network. Some large distributors have also forayed into the logistics business for their clients.

Since logistics service can be provided without assets, there is growing interest among entrepreneurs to venture into this business.

Indian shippers are gradually becoming more aware of the benefits of logistics outsourcing. They are now realizing that customer service and delivery performance are equally important as cost to remain competitive in this global economy.

The Indian economy is growing at over 9% for the last couple of years (compared to the world GDP growth rate of 3%), which implies more outputs and more demand for specialized logistics services.

The Indian government has focused on infrastructure development. Examples include the golden quadrilateral project, east-west and north-south corridors (connecting four major metros), Free Trade and Warehousing Zones (FTWZ) in line with Special Economic Zones (SEZ) with 100% Foreign Direct Investment (FDI) limit and public private partnerships (PPP) in infrastructure development. It is expected that infrastructure development would boost investments in the logistics sector.

In India, 100% FDI is allowed in logistics whereas in China, until recently, foreign investment was not allowed in domestic logistics. Almost all large global logistics companies have their presence in India, mainly involved in freight forwarding. For domestic transportation and warehousing, they have tie-ups with Indian companies.

As the Indian logistics scenario looks promising, these MNCs are expected to play a bigger role, probably forming wholly-owned subsidiaries or taking the acquisition route. The latter may be the preferred route of investment since the target company is readily acquired with its asset base and distribution network, and the need for building everything from scratch can thus be avoided. The benefits for the acquired company include the patronage of an MNC and access to the MNCs global network. As an example, DHL Danzas, the biggest logistics company in the world, has taken over Blue Dart.

Indias logistics sector attracted investments worth Rs. 23,200 crore in first half of 2008, according to a study by Assocham. It outclassed some of the major sectors including aviation (Rs 20,890 cr), metals and mining (Rs 8500 cr) and consumer durables (Rs 6000 cr) among others.

According to industry analysts, almost all logistics players are in the process of setting up warehouses, container freight stations, inland container depots, logistics parks, distribution centres and other facilities to tap the trade opportunities fuelled by revolution in the retail, ports etc. There are plans for 4 logistics parks spread across approximately 400 acres. Centers like Haldia, Falta, Pargana, Dankuni, Kharagpur, Bantala and Durgapur are expected to witness substantial logistics activities in the near future. Five logistics parks are being set up in Hyderabad, spread across 220 acres and approximately 10 mn sq ft of warehouse space coming up by 2012.

5.2 Prospects of containerized logistics industry

A). Privatization

Traditionally, railways worldwide have been under the control of the federal government. In the past few decades, many developed countries including the US, UK, Japan, and European Union have undergone various reforms and even restructuring of their railway systems to convert the state owned monopolies into public private partnerships with a competitive environment. Both freight and passenger services in these countries are provided by multiple operators. Freight operations, including container, are subject to open competition. In some other developing countries including China, Russia, Malaysia, and India, all freight and passenger operations are managed by the government owned railways. Recognizing the potential of container based movement, the railways of these countries have segregated the container operations by creating subsidiaries which are the sole providers of container rail haulage. India also created the Container Corporation of India (CONCOR) as a monopoly container train operator (CTO) in 1988. India has moved a step further in 2006 after opening up the container rail sector to competition, involving private and public sector operators. CONCOR CONCOR, the incumbent container train service provider, was set up in 1988 as a wholly owned subsidiary of IR. It had built a strong asset base over the past twenty years. CONCOR had 59 terminals, of which 39 were rail linked ICDs in many interior towns, serving almost all the regions of India. As of December 31, 2009, it had 218 rakes, 8117 high speed wagons, and 13,576 (owned and leased) containers. In 2008-09, CONCOR handled 2.31 m TEUs of container traffic, of which, 1.84 m TEUs were export import. Its total income was Rs 36,280 m and the net profit was Rs 10,140 m. CONCOR paid over Rs 1000 m as haulage to IR [CONCOR, 2009].

ENTRANTS In the first round of registration (January 16-

February 15, 2006), 14 operators, including the incumbent CONCOR, signed an agreement with IR. IMPACT In 2008-09, IR moved 30,342 thousand tons of total container traffic, of which, 23,287 thousand tons was international and 7,055 thousand tons was domestic. This would yield to 2,758 thousand TEUs of total container traffic, of which, 2,117 thousand TEUs would be international and 641 thousand TEUs would be domestic. CONCOR reported carrying a total of 2,308 thousand TEUs, of which 1,855 thousand TEUs was international and 453 thousand TEUs was domestic in the same year. Therefore, in 2008-09, total CTOs traffic could be estimated as 450 thousand TEUs, of which, 262 thousand TEUs would be international and 188 thousand TEUs would be domestic To the credit of CTOs, more commodities moved in containers and new services were being provided on routes where road was a monopoly. The following examples demonstrate this: One of the operators was providing customized solutions for moving marble in containers from Kishangarh and Makrana (both in Rajasthan) to Kolkata (West Bengal). Earlier this traffic was moving entirely by road. Now 60% of marbles on this route move in containers. 25% market was captured by CTOs for tiles moving from Morbi (Gujarat) to Eastern India. There was a major shift from road to rail for refrigerated containers from National Capital Region to Mumbai. Effects upon CONCOR CTOs posed stiff competition to CONCOR, a monopoly service provider for nearly 17 years, by offering value added services. This was reflected in CONCORs market share which dropped from 95% in 2007-08 to 76% in 2008-09. In a strategic move to retain the market share, CONCOR reduced tariffs for FEU (forty foot equivalent unit) containers, dropped rates on selected routes, and introduced incentive schemes (volume discounts, bulk discounts, rebates, lower rates for moving empty containers, and longer free time for clearing loaded import containers) and formed joint ventures with companies to provide end to end intermodal logistics solutions to its customers.

Overall, in the face of competition, CONCOR has become more dynamic by trying to enter into value added businesses.

Issues As per recent industry research, the total Indian freight market in the country was about

3.1 billion tons (bt) in 2008-09 [IDFC-SSKI, 2009]. This freight has grown at a compounded annual growth rate (CAGR) of 8% between 2006-07 and 2008-09. Of the total 3.1 bt, the international cargo was 25%. The rail share was only 30% (850 million tons (mt)) despite rail being more economical, faster and environment friendly. Indias domestic container cargo is extremely low, estimated at 20-30 mt. With the entry of CTOs, this sector has gained much focus and volumes are likely to grow. The business has a long gestation period which is further increasing with IR exercising its right to change tariffs and norms from time to time. Since CTOs entered this business, IR has increased haulage, introduced new charges, and brought in restrictions on bulk commodities. Some of the CTOs feel insecure as their expenses are higher than revenues, resulting in losses.

a). Entry Costs With all upfront and variable investments, the business has become highly capital intensive with a long gestation period for CTOs. They had to pay Rs 500 m/Rs 100 m as one time registration fee. It was mandatory for them to build an ICD within three years of getting the license. A medium sized ICD costs anywhere between Rs 750 to 1000 m. Initially, many CTOs tied up with CONCOR for using their ICDs. CTOs felt that the charges by CONCOR were high. CTOs have to procure their own rakes and containers. One rake, together with containers costs about Rs 140-150 m. It is estimated that a minimum investment of Rs 2000 m is required from a CTO to start the business, considering five rakes and one ICD.

b). Pricing by IR The major pricing element is the haulage, a charge that IR levies on CTOs for using its tracks, locos, and signaling infrastructure. The haulage alone accounts for 70-75% of their operating costs. Haulage has been increased four times since the final policy in January 2006, with effect from (wef) November 01, 2006, October 01, 2008, July 01, 2009, and January 01, 2010, with a total increase up to 20%. The economic downturn in 2008-09, shortly after operators got their licenses, forced many operators to stable their rakes for want of business. Stabling charges at Rs 13,000 per rake per day were introduced. In January 2007, one year after the policy announcement, while releasing the MCA, the IR restricted ores, minerals, coal and coke, accounting for 70% of total rail freight, for carrying by containers. The commodity basket for CTOs was thus restricted to just 30% of what moves by rail. All these charges impacted CTOs by adding to their operational costs.

c). Service Levels by IR The policy did not provide CTOs any service level guarantees from IR. CTOs were demanding guaranteed transit time or a fixed time tabled schedule for container trains, which IR denied on the ground of network capacity constraints. As of now, IR does not have a time table for freight trains. Passenger trains run with a time table and are given priority over freight trains. In the absence of such a guarantee, CTOs were having difficulties in ensuring timely delivery to their customers, and managing their own logistics.

d). Maintenance Rake maintenance is only done by the IR at designated facilities. As of December 2009, the designated facilities were 21, eight in IR yards, 10 in CONCOR premises, and three in CTOs premises. Each rake is assigned a particular facility for examination. It is possible that

such a facility is away from the main circuit on which a rake is operational and hence the rake has to move a long distance to reach the facility. The train examination is done only by a railway TXR staff. This needs coordination with railways. Sometimes the rake is ready but the examination is delayed. CTOs are not allowed to hire their own TXR staff.

e). Level Playing Field with CONCOR While CTOs have to buy land at market prices, CONCOR had been provided land at prime locations from the IR at a low rate. CONCOR still pays a very nominal lease rent for this land. CTOs were not extended any support from the IR in procuring land, though IR has a large amount of vacant land across the country. In the absence of their own ICDs, 10 CTOs initially tied up with CONCOR for using its terminal infrastructure. Access charges levied by CONCOR for these terminals were felt as quite high by CTOs. Although CONCORs terminals are built on IR land, IR did not exercise any control on this matter.

Recommendations a). Pricing and Service Levels There are two interfaces which are subject to regulation for pricing and service level guarantees (i) IR vis--vis CTOs and (ii) CTOs vis--vis customers. Between IR vis--vis CTOs, haulage increase, service guarantees, and commodity restrictions have been the major areas of concerns. There has been no rationale for haulage increase. Instead of restricting commodities, IR could have levied a different haulage for such commodities. To improve the current pricing, other models could be evolved e.g. revenue sharing between IR and CTOs, route based cost of haulage etc. More importantly, these matters need to be overseen by an independent regulator to ensure stability and transparency so that CTOs interests can also be protected. In the

absence of such a regulator, IR exercises its control with conflicting interests as licensor, regulator, service provider and operator. Between CTOs vis--vis customers, there is already competition among 16 players and market forces will ensure fair charges and services for customers.

b). Maintenance There is a need for more number of wagon examination facilities in the country. Though CTOs are currently allowed to establish facilities in their premises, the train examination is done only by the railway TXR staff which results in delays. c). Level Playing Field with CONCOR IR should dilute its ownership in CONCOR, which is currently 63%, for providing a true level playing field to CTOs with CONCOR. Due to holding more than 50% stake, IR has control on the ownership and management of CONCOR. Key professionals from IR move to CONCOR on deputation. There are conflicts of interests if IR, the licensor, is also an operator in the same business through its subsidiary.

B. SIZE OF THE MARKET

Enough freight volumes in the system India has a large freight market estimated at 3.1bn tones in volumes, which have been expanding (8% CAGR over the past three years) in line with the rapid economic growth. Interestingly, only 30% of this cargo is estimated to be handled by the railways despite rail being a cheaper, faster and more efficient mode of freight movement against roads due to lack of focus by IR on aggregation of cargo. Indian railways are trying to address the loss of market share through containerized operators.

Exhibit 2: Indicative break-up of freight handled in the country (m tones)

FY 06 Rail freight Road freight Sea freight Air freight Total freight in the country 667 1,353 424 1.40 2,445

FY 07 728 1,478 464 1,55 2,671

FY 08 794 1,612 519 1.71 2,927

FY 09 850 1,726 530 1.70 3,108

Source: Industry data, IDFC-SSKI Research but penetration of container rail is quite low The domestic segment is extremely fragmented with limited penetration of containerized rail movement, which is estimated to be 1% (~6m tones) currently. Penetration of container rail is relatively higher in port volumes (exim cargo) with 30%, or ~2m TEUs, being transported by rail. Currently, the container rail industry has a capacity of ~315 rakes, of which Concor accounts for 218 rakes with the remaining being with private players. As per our discussions with various operators, the total number of rakes is likely to increase by 200 rakes to 500 rakes over the next three years. With 500 rakes operational and at 100% utilization, we estimate that container rail operators would have a capacity of 97m tones. Notably, the targeted volumes are 3% of the overall freight market in India (including all modes of transportation) and only 6% of the volumes moved by road. Accordingly, we believe there are enough volumes for all the players in the system.

C. FOCUS ON 3PL

In this era of globalization, India is witnessing an increasing demand for the third party logistics (3PL) business, with companies now concentrating on managing their supply-chain mechanisms in a better way to deepen their market penetration. Companies are shifting their focus from transaction strategies to relationship-based alliances, such as partnerships. All types and sizes of companies ranging from small firms to multinationals are becoming increasingly aware that they can gain a competitive and economic advantage by outsourcing their supply chain and logistics requirements. Further, continuous improvement in logistic infrastructure has led 3PL services to be perceived as a far better mode of controlling both internal and external logistic processes.

In-line with this development, we expect that improving infrastructure and rising focus on core business operations will lead the future growth of the Indian 3PL market. The market is anticipated to witness a CAGR of around 27% during the forecast period (2012-2014), harvesting a total revenue of nearly US$ 5.8 Billion by 2014.

Unfortunately, 3PL vendors often lack the capabilities to deliver full supply chain solutions. Indias huge geographical diversity requiring varied logistics expertise for each region presents the biggest challenge that needs to be addressed by the 3PL service providers. To overcome this problem, 3PL companies have to make huge investment to setup a logistics network to support the flow of products from the clients manufacturing plant to the end customers. This can be undertaken by building warehouses and DCs at locations required by their clients. Despite this, Indian market is full of opportunities compared to developed markets, because of the infrastructural development, such as ports, highways, bridges as well as increasing connectivity and rising significance of logistic services in the country.

Country

Logistics Cost/GDP

PROBLEMS

a). COST OF LOGISTICS

A World Bank Study conducted recently says that the Indian Logistics cost is one of the highest in the world. This study shows that as far as developing countries are concerned, these costs are 6 % to 8 % of the total value of goods. In China the cost is estimated at 10 % of total value of goods. By comparison, the cost of logistics in India is 14 % of the total value of goods. The freight costs for rail and road are quite high, for example

France Japan Canada India

5.5 cents/km 3.7 cents/km 2.0 cents/km 7.0 cents/km

Table 1: Comparison of cost of logistics between different countries

India U.S. Europe Japan

13% 9.9% 10% 11.4%

The following three factors are primarily responsible for the high cost of logistics in India:

Congestion cost Congestion at ports, inland and roads have rapidly increased Thus directly augmenting logistics cost and also resulting in overall high inventory cost as delivery time increases. Transaction cost Administration costs including insurance and government taxes continue to be very high. The logistics cost could rise further due to supply and demand factors.

Demand and supply factors The continued rise in container traffic is leading to increased traffic congestion in the rail and roads network, as exports and imports are growing 22 % to 25 % annually. The high cost of terminal development along with relatively latest innovation in finalizing strategies result in only moderate pace in the supply chain addition. There is also lack of proper road infrastructure in the Class-B & Class-C towns. The lack of specific logistic professionals is also hampering the growth.

b). Insufficient infrastructure In India infrastructure is not in a very good shape. The railway lines are almost saturated and the roads are also not in a very good condition. The number of road accidents is increasing and the Indian railways are not willing to promise a specific time frame during which the container will reach the destination. Due to this the average delivery time of cargo in India is greater than as compared to most of the developed nations

D. RAIL LOGISTICS

The domestic cargo container movement is still at a very initial stage in India. The road transport is mainly in the hand of highly unorganized players. Further rising fuel prices and axel load reduction are making road transport uneconomical over a long haul. There is a movement of 30 percent of exim containers by rail and the remaining is transported by road. Till 2005 CONCOR was a sole service

provider for rail transportation of containers.

a). Container Rail Logistics SWOT

Strengths There is a consistent growth over a CAGR of 25 % with a potential of 100 mmt in the year 2005-06. A total of 1.7 MTEUs were rail borne, out of which the North contributed 0.71 MTEUs and the West 0.23 MTEUS. Weakness This is a highly capital intensive business and the cost of rolling stock is around Rs.13 crores /rail. The cost of operating an inland container depot is around Rs. 100 crores. The entire infrastructure such as yard/containers/ signals is still provided by one service provider namely Indian Railways. There is a long gestation period and the project may take sometimes up to 10 years to achieve break even. There is high concentration of traffic at selected port/hinterland. 78 % of the total container cargo is handled by west coast ports. 70 % of total traffic at the west coast is handled by a single port, i.e. Jawaharlal Nehru Port Trust (JNPT). 60 % of the traffic of the west coast moves to the northern hinterland, which leads to a heavy congestion along the routes. Opportunities With the growth of containerization due to growing GDP, there exists huge potential in the form of a largely virgin market. With the congestion at the existing road linkage ICDs and limited scope for excavation, there is an opportunity for development of competing facilities. There is a potential for running double stacked trains with the lower haulage charges and better utilization of rolling stock and track capacity.

Threats This industry is highly dependent on external agencies such as Indian Railways, port terminal operators and shipping lines. There are still several unresolved issues on operational matters, such as stability of rakes, service guarantee and dedicated freight corridors. With regards to double stacked operations due to the lack of a developed infrastructure, this may take time to take off in a larger way. There exists fragmentation on volumes due to multiple operations and there is no control on haulage cost. b). Potential for domestic container movement Due to the expected growth in the trade of readymade garments, textiles, handicrafts, processed and packed foods etc., a greater demand for containerization is anticipated. Further developments of larger SEZs and industrial parks is likely to boost the industrial development in the country. The additional container handling capacity would result in a higher penetration of containers in the break bulk cargo segment, thus helping container trade to grow further. Private container trains would also assist in providing sufficient hinterland connectivity for ports, thus facilitating handling increasing volumes of container traffic.

c). Inherent advantages of the rail container transport i) Lower transportation cost ii) Higher reliability iii) Relatively safe and secure iv) Very environmentally friendly v) Reduced accidents.

As can be seen from the graph above, the number of accidents in rail traffic during 2004 are 2.34 lakhs as compared to 4.29 lakhs in road transport which is far less in comparison. d). Dedicated Freight Corridor This corridor will enable the rail infrastructure to carry very high levels of freight leading to a reduction in unit cost of transportation and inventory. This will also achieve greater customer satisfaction an increase the Indian Railways share in the freight market. This shall also provide increased throughput by higher axel loads increasing the moving dimensions, track loading density, improve pay load ratio. Initial routes Rites, which prepared the initial feasibility report, has

been commissioned to prepare detailed plans for two main corridors. These are aimed at easing capacity constraints on the so-called Golden Quadrilateral routes linking the metropolitan regions of New Delhi, Kolkata, Mumbai and Chennai, which at present carry around 80 % of IRs traffic. The 1.493 km double-track western corridor will run from Jawaharlal Nehru Port in Mumbai via Ahmedabad, Palanpur, Phulera and Rewari to Dadri in Uttar Pradesh, close to New Delhi. This will handle the rapidlygrowing container traffic between the ports of Gujarat and Maharashtra and the hinterland in northern India, cutting the Mumbai - Delhi time from 60 to around 36 h. There will be a feeder route to serve the container depot at Tughlakabad. The 819 km double-track eastern corridor between Sonnagar and Khurja runs parallel to the existing Howrah - Delhi main line via Mughalsarai, Fatehpur and Etawah. Bypasses are planned around the urban areas at Allahabad, Kanpur, Tundla, Hathras and Aligarh, and the corridor will be grade-separated from intersecting branch lines. A single-track extension of the eastern corridor will run to Ludhiana in Punjab via Khurja, Meerut, Saharanpur and Ambala. Consultants are currently examining the technical and economic feasibility of extending the route to Gomoh and the ports in western Bengal. The western corridor will also have a feeder route to Dandarikalan container depot near Ludhiana, running via Rewari, Hissar and Jakhal. A new line is to be built between Rewari and Dadri to bypass the congested Delhi metropolitan area.

TABLE

Table 2: Savings achieved due to double stacked containers

Table 3: Comparison of load capacities in various countries


e). Scheme of private sector participation in the railways

In this scheme of private sector participation in the railways which has been announced in February 2006 by the Indian government, the Indian Railways will provide the track, locomotive, signal, train crew for running container trains. The train operator is to procure wagons and his own terminal. He can also use other terminals. The lane for the terminal will also be made available. The maintenance of the wagons will be done by the railways. Railways will collect the train haulage charges. Train operators shall also be free to charge their own tariff from the customer. Even though the rail logistics sector is opened for the private sector, following challenges will have to be met by this sector: Procurement of the wagons, ICD, trained manpower, monitoring machinery for movement of trains en route, detachment of wagons, exchange of information with railways. This shall immediately lead to escalation of land price, costlier wagons, costlier handling equipment and costlier manpower. Long term challenges to be faced shall be evacuation, as bigger vessels discharge larger volumes. Port rail terminal capacity will also challenge the new operator. There shall be imbalance between the import and export. The end cost will also have to be kept under control. The hub and spoke model of operation shall have to be optimized. This shall also lead to consolidation of hinterland volumes. In the current Indian market, the exim trade is looking for reliability and predictability of services, hinterland penetration and capability of costs. As regards the new

private players in the rail transport logistics sector, they should collaborate and cooperate which existing players, avoiding attrition, duplication of structural infrastructure and working together to bring about reduction in logistics cost for customers. This shall only be possible with improvement of the process, exchanging of information as much as possible and sharing each others structures and wagons. E. SEA LOGISTICS Transportation by sea is less expensive than transportation by road or railways. The secondary port development requires less infrastructure. Terminal development can easily be handled by private operators. A policy supporting sea transportation in the country, has to take into account the following issues: i) Developing secondary gateways along with the coast; hinterland to be encouraged to use the nearest coast; developing SEZ in the immediate vicinity of these ports. Feeder cargo should be sent to the nearest main line port. As the cargo starts moving through the secondary ports, the volumes will increase and secondary ports will slowly graduate to become the main line ports. ii) Size and growth rate of the Indian logistics industry is varying from USD 15 billion to USD 50 billion, with 7 % to 8 % growth per annum. iii) As regards the logistics service providers, quality infrastructure support is not always available on time, due to the high pace of economic development. This includes airport infrastructure, seaports, highways and express ways. iv) Cumbersome procedures lead to a lack of focus on the

part of policy makers. The logistic costs in the Indian economy is higher than in other countries, due to infrastructure bottlenecks. v) The price of fuel forces the users to shift from road transport to alternative transport modes. Only a very small and limited number of logistics service providers are providing end-to-end logistics chain in a true sense. A large number of fragmented service providers aspire to cover all services. However, an integrated approach is lacking.

Fig. 2: Commodity traffic growth in India during 2004-05

Fig. 3: Traffic growth in Indian ports

5.3. Prospect of growth of CONCOR

a)

CHANGE IN STRATEGIES

There will be a need for CONCOR to adopt different strategies for growth in the changed external business environment due to opening up of Rail sector for container train operation for 16 other players. More emphasis will be required on providing total logistics and transport solutions to its customers by seeing the possibilities of expanding the presence of the company in all the segments of the transport value chain in the Exim as well as Domestic segment. Possibilities are to be explored for strategic alliances, both for optimal utilization of infrastructure as well as expansion into other segments of the value chain.

b)

EXPAND IN NEW DOMAINS

The emergence of number of new ports viz. Mundra, Pipavav, Vizag, Tuticorin, Vallarpadam , Ennore, Krishnapatnam, Karaikal & some minor ports in Gujrat like Porbandar, Okha, Maroli etc. will have a large effect on the hinterland movement of containers in the country. Further, the hinterland penetration levels of the container traffic, which are very low at present, are also bound to see a many fold increase. This change in the environment offers immense potential for CONCOR to identify new business opportunities and remain the market leader by expanding into new corridors. c) End to end service provider CONCOR has a strong capital base. It should capitalize its capital base and venture into new areas like providing end to end logistics to its customers. For this purpose railroad cooperation, hub and spoke model (to cater the needs of small customers) could be used. It could enter into joint venture with some private companies for providing more efficient services to its customer. d) Engage in 3pl business One of the most important logistics functions of Indian industries still are transportation and warehousing, which are likely to be outsourced to the 3pl service providers in the country. High level of growth is estimated in Indian 3pl market in next 5-7 years. The Indian 3pl market estimated at about 890.3 mn in 2005 is estimated to grow at CAGR 21.9% to touch USD 3,556.7 mn in 2012 Fig: share of 3pl in logistics market Japan US Europe India 80% 57% 40% 9%

Source: Indiastat database, KPMG Analysis


The company has a large asset base. Indias huge geographical diversity requiring varied logistics expertise for each region presents the biggest challenge that needs to be addressed by the 3PL service providers. To overcome this problem, 3PL companies have to make huge investment to setup a logistics network to support the flow of products from the clients manufacturing plant to the end customers. This can be undertaken by building warehouses and IDCs at locations required by their clients. The 3pl market is anticipated to witness a CAGR of around 27% during the forecast period (2012-2014), harvesting a total revenue of nearly US$ 5.8 Billion by 2014. Since it is not easy for a small company to construct an ICD and warehouses the company can gain from it.

6. FINDINGS

Despite the global meltdown the logistics industry is set to grow at around CAGR 15%

Logistics service is mostly under the hands of unorganized sector, unorganized sector accounts for around 99% share in logistics sector and organized sector has only around 1% share

There is enough scope for growth in the sector because of the large size of the market and lower penetration till now

CTOs posed stiff competition to CONCOR, a monopoly service provider for nearly 17 years, by offering value added services. This was reflected in CONCORs market share which dropped from 95% in 2007-08 to 76% in 2008-09.

CONCOR has managed to retain a lions share of the container business moving through IR despite intense competition There is an increased demand of 3pl service providers, the companies can benefit from this demand Road logistics still accounts for most of the logistic service in spite of being uneconomical which carry about 70% cargo to the ports

7. Suggestion

The number of terminals in central and eastern India is quite low, companies with high asset base can venture in this area

Container penetration for international cargo, which is currently about 68% should be increased

The company should enter in the 3pl market which is highly untapped and has huge potential CONCOR should venture for rail road partnership to attract new customers

8.LIMITATIONS Logistics is a vast industry. The study of logistics cannot be done in 8 weeks time Due to fierce competition companies are not willing to share their data easily The industry data is not easily available in public domain Another limitation could be lack of knowledge. Being a student i have tried my best to learn from the experience

9.BIBLIOGRAPHY

1. 2. 3. 4. 5. 6. 7.

www.concorindia.com www.marketresearch.com www.scribd.com www.logisticmgmt.com www.eximin.net www.financialexpress.com www.eximguru.com

1. Engagement in Business requiring logistics

1. Engagement in Business requiring logistics


(i) (i) (i) (i) Less than one year 1-5 years 5-10 years More than 10 years 5% 5%

1. For how long have you been


in international business? (i) Less than one year (ii) 1-5 years (iii) 5-10 years (iv) More than 10 years

Result:
63% of the companies, firms surveyed are more than 10 year old
27%

in

international

business

while 27% are from less than 10 years but more than 5 years in international business. 10% of the surveyed firms are in

63%

international business for less than 5 years.

Interpretation:
This data has been collected to have an insight of .in about the and

experience importers

exporters

international

business. Since 90% of the respondents are in the industry for more than 5 years, they will be well acquainted with the complexities business. of international

2. Frequency of trade

Frequency of trade
0-5 times 5-10 times 10-15 times more than 15 times

10% 8%

53% 29%

2. How many times a month do you trade domestically or internationally?


(v) (vi) (vii) (viii) 0-5 times 5-10 times 10-15 times More than 15 times

Result:
53% of the respondents are trading for more than 15 times whereas 29% of them are doing it more than 10 times but less than 15 times.

Interpretation:
This data has been collected to have an insight about the requirement of logistics service to exporters and importers in business. Since 53% of the respondents use logistics service for more than 15 times, it means cheaper mode of transport and timely delivery of goods is essential for their business.

Mode of transport
Rail Road Air Sea

20% 3% 52% 25%

3. Which mode of transport do you prefer?


(ix) (x) (xi) (xii) Rail Road Air Sea

Result:
52% of the companies, firms surveyed said that they prefer rail as a mode of transport over other modes whereas 25% prefer the sea route. 20% prefer the road route and 3% prefer air route.

Interpretation:
Selections of mode of transport primarily depend on the type of the good, destination point, time factor and cost factor. Majority prefer railway because it is more convenient, cheaper, capable to carry heavy and bulk cargo.

Use of containerized logistics service


Yes No 0% 0%

38%

62%

4. Do you use containerized logistics service?


(i) (ii) Yes No

Result:
62% of the companies, firms surveyed said that they prefer container stuffing for their products, whereas 38 % send their goods in loose packings.

Interpretation:
Most of customers preferred container for their goods as it is safe and easy to handle

If no,why?
small size of cargo Terminal too away from factory High Charges Small Distance

9%

21%

56% 14%

5. If NO then WHY?
(i) (ii) (iii) (iv) Small size of cargo Terminal too away from factory High charges Small distance

Result:
56 % firms said they prefer loose cargo due to the small size of cargo and 21% said because of the high charges levied by the transporters

Interpretation:
Most of the firms which preferred loose packing were involved in domestic business where to quantity transported is of small size and to small distance

Container Prefernce
Dry Reefer 3% 3% 7% Tank Other

87%

6. Which type of container do you prefer for your goods?


(I) (II) (III) (IV) Dry Reefer Tank Others

Result:
87 % firms said they use dry containers for their goods, while 7 % said they use reefer containers

Interpretation:
Dry containers are mostly demanded for transportation whereas there is very little demand for others

7. Availability of Containers

Availability of containers
Strongly Agree Somewhat Agree Neither agree nor disagree Somewhat disagree Strongly Disagree

7. The containers are easily available whenever required. (i) Strongly agree (ii) somewhat agree (iii) Neither agree nor disagree (iv) somewhat disagree (v) Strongly disagree

Result:
42% of the respondents strongly agree that they get container whenever there is a requirement. 35% also feel same to some
10% 10% 3% 35%

extent. While 20% of them disagree that they get the containers booked whenever they required.

42%

Interpretation:
Going by the responses, it is evident that there is no any dearth of containers at CTOs and the shipping lines are providing the containers whenever the customer demand. But there are 20% respondents who think containers are not always easily available.

8. Freight charges by transport service providers

Freight charges by transport service providers


Too high High Reasonable Low

8. How do you think are the freight charges and other charges levied by the CTOs? (i) Too high (ii) high (iii) Reasonable (iv) Low

Result:
62% of the respondents found the charges
0%

levied by CTOs to be high whereas 38% found it to be reasonable. No one found the
22%

charges to be low.

38%

Interpretation:
Transport service providers charge the customers,
40%

freight

charges,

handling

charges and ground charges. Most of the respondent found the charges on the higher side and concede that it should be reduced. Although price is a factor which generally no one found to be reasonable or low and people always want it to be slashed. But if 62 % found it to be high, it is definitely a matter of concern.

Questionnaire

1. For how long have you been in international business?


(i) Less than one year (ii) 1-5 years (iii) 5-10 years (iv) More than 10 years 2. How many times a month do you trade domestically or internationally? (v) 0-5 times (vi) 5-10 times (vii) 10-15 times (viii) More than 15 times

3. Which mode of transport do you prefer?


(ix) Rail (x) Road (xi) Air (xii) Sea 4. Do you use containerized logistics service? (i) Yes (ii) No

5. If NO then WHY?
(i) Small size of cargo (ii) Terminal too away from factory (iii) High charges (iv) Small distance 6. Which type of container do you prefer for your goods? (I) Dry (II) Reefer (III) Tank (IV) Others 7. . The containers are easily available whenever required. (i) Strongly agree (ii) somewhat agree (iii) Neither agree nor disagree (iv) somewhat disagree (v) Strongly disagree 8. How do you think are the freight charges and other charges levied by the CTOs? (i) Too high (ii) high (iii) Reasonable (iv) Low