Logistics

Operations Strategy
Term VI
MDI Gurgaon
Section B: Group-02

Amitabh Gautam 13P123

Disha Aggarwal 13P140
Nikhil Jain 13P152
Shashank Shukla 13P166
Dhaval Thakkar 13P242
Arun
Ahlawat 13P199
Niket Gupta 13P217

Agenda
Overview
Inter-relationship between
transportation and logistics
Forms of Logistics Operations
Outsourcing of Logistics Activities
Indian Logistics Industry - Growth
drivers
Issues in Current status of logistics
infrastructure in India

Overview

Definitions
As per Council of Logistics Management,
logistics:

part of the supply chain process that plans, implements,

and controls the efficient, effective forward and reverse
flow and storage of goods, services, and related
information between the point of origin and the point of
Logistics:
consumption in order to meet customers requirements
the entire process of materials and products moving into,
through, and out of firm

Supply-chain management:

larger than logistics

links logistics more directly with the users total
communications network and with the firms engineering
staf
Logistics
is Customer-oriented operation

management

Components of Logistics System

3 closely linked components:
Logistics services, Information
Systems and
Infrastructure/Resources
Logistics services comprise
physical activities and nonphysical activities
Information systems provide
essential data and
consultation in each step
Infrastructure comprises
human resources, financial
resources, packaging
materials, warehouses,
transport and
communications

Interrelation Between
Transportation and Logistics

Transport Costs and Goods Characters in Logistics

One-third to two-thirds of the expenses of enterprises
logistics costs are spent on transportation
National Council of Physical Distribution Management
(NCPDM), estimates the cost of transportation, on average,
accounted for 6.5% of market revenue and 44% of logistics
costs
Components of logistics costs based on the estimation from
Air Transportation Association show that transportation
occupies 29.4% of logistics costs
Transport afects the results of logistics activities and
influences production and sale
Improvement of higher operation costs can get better efects,
therefore logistics manager must comprehend transport
operation thoroughly

Role of Transportation in Service Quality

It is more complex than carrying goods for the
proprietors
Needs high quality management
With a well-handled transport system goods can
be sent to the right place at the right time in
order to satisfy the customers demands
It brings efficacy and bridges the gap between
producers and consumers
A good transport system brings benefits not only
to service quality but also to the company
competitiveness

Forms of Logistics
Operations

Supply Chain Management

A concept for handling production procedures in broad sense
Supply Chain Management is composed of three main
activities:
Purchase
Manufacture
Transport
An important system which links the whole supply chain from
supplier and manufacturer to consumer is the Information
flow
Operation accuracy and competitiveness could be increased
via unimpeded information flow
Product flow proceeds through the production process

Reverse Logistics
Two main reasons can be attributed to rise of reverse
logistics:
Globalization of markets
Policies for environment protection

It could primarily help in 2 ways

Improve the service levels of companies
Reduce the costs of production processes

Professional knowledge on logistics management is

limiting the desire of more and more companies to
build their own reverse logistics
Third-party logistics service thus provides an option
to small to mid-size companies

Maritime Logistics
Maritime Industry has mainly 3 types of operations:
Liner Shipping: The business is based on the same ships, routes,
price and regular voyages
Tramp Shipping: It has irregular transport prices, unsteady
transport routes and schedules. Usually delivers goods like dry bulk
cargo and crude oil
Industry Shipping: Sometimes needs specialized containers, such
as high-pressure containers for natural gas since its main purpose

is to ensure supply of raw materials

It plays an important role in international freight
It is cheap and has high carrying capacity, vital for
transportation of particular goods such as crude oil and grains
It takes longer time and strongly afected by weather

Land Logistics
It extends the delivery services for air and maritime from airports and

seas
Main transport modes are railway transport, road freight transport and
pipeline transport
Railway transport

Pipeline transport

Road transport

Advantages Advantages
Advantages High carrying
high capacity, less
cheaper
capacity, lower
efect by weather
investment funds,
influence by
conditions, cheaper
high accessibility,
weather
operation fee, and
mobility and
conditions, lower
continuous
availability
energy
conveyance
consumption
Disadvantages Disadvantages Disadvantages expensive
low capacity, lower
High cost of
infrastructures,
safety, and slow
essential facilities,
harder supervision,
speed
difficult and
goods
expensive
specialization, and
maintenance, lack
regular
of elasticity of
maintenance
transport
in efficiency and reliability, a revolution
To improve
the
land
urgent demands,
needs
of transport
policies and management is required, e.g. pricing
and
time
consumption in

Air Freight Logistics

It provides the delivery with lower risk of damage, security, higher

speed, flexibility, accessibility and good frequency for regular

destinations
Its disadvantage is high delivery fee
Future pattern of air freight logistics is cooperative with other transport
modes, to provide a service base on Just-In-Time, and door-to-door

Express Delivery
Involves more frequent delivery of materials, at the right
time and at the right place in the production process
The characteristics of express delivery are:

door-to-door service
Efficiency
Traceability
Just-In-Time (JIT)
Growing various delivery demands

E-Commerce
Considered to be the future trend of business
Brings many benefits for both companies and consumers:
Expansion of market area from regional to global
Usage of electronic techniques instead of traditional paper works, which
promotes the industries efficiency and competitiveness
Might reduce the number of warehouses and the stock cost and the
savings could be passed on to consumers in terms of lower prices

Concerns to be addressed include

internet security
transport impacts
door-to-door services

An optimal logistics operation determines a healthy and

successful e-commerce environment

Outsourcing of Logistics
Activities

Need for Outsourcing

Efficiency in logistics activities indispensable to

efective business operations

Globalization driving higher level of complexity in

logistics network

Importance of distribution and transportation in

maintaining sustainable competitive advantage

Companies seeking to concentrate on core

activities

3PL Third Party Logistics

Advantages of 3PL operators
Greater expertise
Flexibility for wide geography
Lower operating costs
Better quality of service

Outsourcing to 3PL has followed two trends

Increasing
Increasing

range of services outsourced

volume of traffic outsourced

Key challenge for 3PL operators Overcoming clients concerns

about relinquishing control

Outsourcing of logistics is expected to increase

4PL Third Party Logistics

Assembles and manages resources, capabilities

and technologies of own organization with those of

complementary service providers

Best of breed approach

Creates unique and comprehensive logistics

solutions that cannot be achieved by any single

provider

Complete solution; Centralized point of contact

Logistics in India

Growth Drivers
Acceleration in industrial production and consumption
Population growth; Expanding upper-middle and middle classes
Expected growth: 7-8% per annum
Heavy outsourcing by automobile/telecom etc. Demand for focused
Supply Chain services
Change in tax system (VAT to GST) Should create national market
for many goods and services
Entry of MNCs in various sectors

Challenges in Indian Logistics

Logistics infrastructure lags behind global peers
Planned investment cannot support 2.5 fold expected increase in
traffic by 2020
Current freight infrastructure Networks built before independence
Railways
- Over 80% of current network built
before independence
- 1951-2007: 10 fold growth in traffic;
1.4 fold growth in track length
Roadways
- 200 fold traffic growth; 8 fold
increase in track length
- Highways Only 15%;
Two/Four lanes 0.5%
- Paved road density
940km/1000sq.km; Japan
21000 km, UK 7050 km
- Highways are structurally
inadequate

Waterways
- Limited investments after
independence
- Loss of key routes following partition

Challenges in Indian Logistics

Logistics flows are highly concentrated

7 corridors connect 15 high growth clusters

These 7 corridors account for 50% of freight traffic
These clusters are expected to account for 60% of GDP growth in next
10 years

Challenges in Indian Logistics

Indias freight traffic relies excessively on roads

This is despite the fact that 2/3rds of freight travel being more suitable for rail and waterways
65% is bulk; 75% transported over distances more than 400km
Roads are cheapest only for non-bulk and <400 km
Over reliance on roads leads to increased costs, high energy consumption and adversely
impacts environment
Reasons
Railways: Oversaturation of important networks, high tarifs, poor terminal quality, less flexibility
of wagons, uncertain transit times
Waterways: High turnaround times at ports, inadequate depths at ports, inadequate infrastructure
for Coastal Shipping
- Rail/Waterways potentially cheaper than
roads

Challenges in Indian Logistics

Inefficiencies leading to $45 billion each year

Indias spend as percentage of GDP is 13%,

higher than that of US
This is despite the fact that cost of labor is
significantly lesser in India
Road transport is 30 per cent more expensive in
India
Rail and Waterways are 70 per cent more
expensive in India
Transit times are higher owing to lower average
speeds
- Causes: Waiting times at toll stations, freeze in
truck traffic during day, port turnaround times,
low priority accorded to freight trains, poor

Way forward
Change in modal mix
Increase investment in railways by reallocating from roads

Building the right networks to support modal mix change

Building Rail DFCs, Expressways, Coastal corridors, last mile links
Creating enablers to maximize efficiency Logistics parks,

standardized containers, IT assets, human resource etc.

Improve rail and road maintenance and existing equipment
Formulating and implementing a national logistics policy

THANK YOU