Information on logistic hubs
- 1. Logistichubs P a g e | 1 Jawaharlal Nehru Architecture and Fine Arts University School of Planning and Architecture Department- Urban and Regional Planning Subject- Seminar (Emerging Planning Contexts, Issues and Alternatives) Topic- Logistic hubs Name- Adithya A Roll No- 17011BA001
- 2. Logistichubs P a g e | 2 Contents Introduction.............................................................................................................................. 3 Global Scenario ........................................................................................................................ 3 Some Major Market Segments of Global Logistics Industry......................................................... 4 Indian Scenario......................................................................................................................... 4 India-Emergence of Global Manufacturing Hub.......................................................................... 5 Challenges Faced by Logistics Industry in India.......................................................................... 6 Transport Related Challenges.................................................................................................6 Storage Infrastructures Related Challenges.............................................................................. 8 Tax Structure Related Challenges ......................................................................................... 10 Technology and Skills Related Challenges ............................................................................ 10 Current logistics issues and trends in India................................................................................ 11 Increased outsourcing of logistics services to a developing market.......................................... 11 Safety issues and inefficient regulations ................................................................................ 11 Coping with infrastructure deficiencies ................................................................................. 11 Major issues in cold and food chains..................................................................................... 12 Impacts of Challenges Faced................................................................................................... 12 Estimated Future Growth......................................................................................................... 13 Main Demand Drivers............................................................................................................. 13 Logistics-Future Trends in India .............................................................................................. 13 The Way Forward................................................................................................................... 14 Prevailing topics and institutions of logistics research in India ................................................... 15 Current trends in logistics research........................................................................................... 16 Logistics networks and clusters in India ................................................................................... 17 Conclusion ............................................................................................................................. 18 References.............................................................................................................................. 18
- 3. Logistichubs P a g e | 3 Logistics in India Introduction Logistics is one of the most important basic industries for any economic growth as it is the management of the flow of products from the place of their origin to the place of their consumption, thus the industry also involves the integration of material handling, warehousing, packaging, transportation, shipping security, inventory management, supply chain management, procurement, and customs service. Logistics management is an area of research that has been getting increasing attention since it may lead to reduced operational costs, improved delivery performance and increased customer satisfaction levels, thereby making an organization more competitive in terms of cost, quality, delivery and flexibility. The importance of logistics is also increasing due to globalization as more and more multi-national companies (MNC) are sourcing, manufacturing and distributing on a global scale, making their supply chains very complex to manage. Outsourcing logistics activities to experienced logistics service providers (LSP), also known as third-party logistics (3PL) providers, may enable companies to get very efficient and customized logistical support whiles themselves focusing on the core organizational activities. Apart from core logistical activities such as transportation and warehousing, LSPs also offer value-added services such as customs clearance, freight forwarding, import/export management, inventory management, assembly/installation, packaging and labelling, distribution, after sales support, reverse logistics and so on. Global Scenario The global logistics industry mainly comprises a complex range of freight and cargo related transportation sectors, such as shipping, warehousing, courier, and road/rail/air freight. According to the report from C and M Research, the total global logistics market reached a value of about $4 trillion in 2013, representing almost 10% of global GDP. The US currently accounts for more than 42% of global transportation services sector. Over the next few years the global logistics market will see the growth in demand away from traditional Western economies to the emerging markets of China, India, other Asian economies, the Middle East and Latin America.
- 4. Logistichubs P a g e | 4 Some Major Market Segments of Global Logistics Industry The global air transportation services industry has been experiencing a decline in growth rate since 2012, while the airline market is expected to reach £137 billion by 2017. After generated around $194 billion in 2011, the global rail freight industry will have an annually growth rate of more than 6% until 2015, and the industry growth will increase to a yearly rate of 8%, reaching $286 billion by 2016, predicted by Market Line. Road freight industry is so far the leading segment in the global logistics industry, representing over 74% of the overall industry in terms of value. The global road freight market is expected to top £2.2 trillion in 2015, which is a 28% increase over 5 years period since 2010. The US represents 56% of the world road freight sector in terms of value. The global shipping industry is expected to surpass 730 million TEUs by 2017, according to Global Industry Analysts. Shipping containers is currently the major way of global trading, the market performance is boosted by the increasing demand of trade, investments in port terminal facilities, and the rising of global maritime transport networks. Indian Scenario The large volume of traffic has provided for growth opportunities in all facets of logistics including transportation, warehousing, freight forwarding, express cargo delivery, container services, shipping services etc. Strength of the logistic sector is likely to be one of the key determinants of the pace of the future growth of the economy. The market size of the logistics sector in INDIA is estimated to be between USD 90-125 billion. Sources estimates that the industry employs over 45 million people and is going at the rate of 15% with sub-sector growing at even 30-40% per annum. Recent policies by the government attract a strong growth area for logistics in the future. The logistics sector in India remains mired in several complexities which have the potential of holding it back and includes significant inefficiencies in transportation, poor condition of storage infrastructure, complex tax structure, low rate of technology adoption, and poor skills of logistics professionals.
- 5. Logistichubs P a g e | 5 India-Emergence of Global Manufacturing Hub Logistic is the backbone of the economy, providing the efficient, cost effective flow of goods on which other commercial sectors depends. Several MNCs from diverse industries have shown growing interest in setting up world class manufacturing facilities in India to cater to the domestic market as well as for the export market. Establishing manufacturing facilities in India has been a strategic move to reduce manufacturing costs and cater to the expanding Indian market. The Indian automotive industry is well on its way to become one of the world’s major automobile manufacturing hubs.
- 6. Logistichubs P a g e | 6 Challenges Faced by Logistics Industry in India Transport Related Challenges But road is still preferred over rail because: Important rail networks are over saturated- There has been little improvement in the track infrastructure since independence. While route kilometre has grown only at a CAGR of 3%, incorporating additional lines on existing routes has not fared much better growing at a low CAGR of 6.6%. During the same period freight and passenger traffic has grown at a CAGR of nearly 55%. This had led to most high density corridors becoming oversaturated. Rail freight tariffs are high- Indian railways follows a policy of subsidizing passenger tariff by freight tariff. This has resulted in sharply rising trend in railway freight rate over the years compare to little increase in passenger tariff rate. The result of this has been that Indian rail freight rates have already become one of the highest in the world.
- 7. Logistichubs P a g e | 7 Transit times are long and uncertain- Freight traffic is frequently subordinated to passenger traffic on the railway network. This results in a freight train taking as much as 6-8 days for a journey of 2000kms. Rail terminal quality is poor- Most rail terminals (goods shed) used for loading/unloading of freight are antiquated. They also suffer from issues of access and evacuation of traffic. Less flexibility in carrying different types of products- Special wagons are not easily available for carrying specialized products. For eg- Special types of steel required for automobile production have to be carried by trucks as the existing wagons do not offer the kind of protection that these high value products require. Railway carriage not easy for industry which cannot provide full train loads- Railways have a preference for customers who can provide full train load as unlike in some other countries, railways in India no longer run mixed trains which can carry different types of cargo due to operational inefficiencies. Road movement has its own set of challenges Road network coverage- Freight movement in India is dependent on national highways. While NH constitutes only about 2% of the road network of India, they carry 40% of total traffic. As a result most of these highways are severely congested resulting in freight travelling only a third of the distance compared to developed countries. Poor road quality- The road quality in India, on the NHs as well as the roads is improving but is still poor in many locations. Estimates suggest that motor able roads are still less than 10% of the total road network. Expressway network will take time to develop- In many developed countries expressways have been developed to facilitate high speed freight movement through linking of important cities, ports and industrial centres. In India the expressway network is still largely at a planning stage with a target of development of around 15000Kms of expressway only by the end of 13th plan period. High level of fragmentation of the trucking industry- The trucking industry in India is largely fragmented and in the hand of small truck operators. Estimates suggest that nearly 70% of the truck owners in India own between 1-5 trucks. Due to this there is
- 8. Logistichubs P a g e | 8 fierce competition amongst operators leading to truck owners resorting to overloading to recover investments. Multiple checkpoints- Trucks in India have to pass through multiple check points in their journey. Trucks have to stop at state borders, for payment of toll taxes, for RTO inspections etc. Issues of Port Sector High turnaround times- Data from Indian ports association shows that ports in India suffer from high turnaround times for ships. JNPT, the premiere port in India, has more than two times the turnaround time of Colombo and Singapore ports because of congestion on berths and slow evacuation of cargos unloaded at berths. Inadequate depth at ports- The depth at many ports in India is not enough and dredging tenders take a long time in getting awarded. As a result with the existing dates many ports are unable to attract very large vessels. Coastal shipping has not taken off- Coastal shipping in India is hampered by inadequate port and land side infrastructure which hampers large scale use of it for freight movements. Storage Infrastructures Related Challenges State of ICD/CFS is poor- The ICD/CFS infrastructure available for EXIM trade is inadequate. The land requirement for setting up ICD/CFS at an appropriate place is difficult to come by as several hurdles have to be cleared in the consolidation of land. As a result many logistics companies with an interest in setting up ICD/CFS eventually fail to do so. The existing facilities are plagued with several issues: Many of the older facilities today are located within city boundaries restricting day movement of trucks. The approach roads to the facilities are poor making evacuation of cargo difficult. Most facilities have issues of inadequate parking, lack of available land for expansion etc.
- 9. Logistichubs P a g e | 9 State of warehousing is poor- Various estimates put warehousing costs to be around 10% of the total logistics costs. On the warehousing front 80-85% of warehouses are traditional with sizes of less than 10,000sqft. Most of these warehouses are not leak proof, equipped with security systems, racking facilities etc. Majority of the operators of these warehouses are also small to mid-sized entrepreneurs with limited investment capacity. The only large warehousing owners are government agencies including central warehousing corporation and state warehousing corporations, but their focus are mainly on food grain storage. There is also shortage of warehouses. This is because land availability for warehousing at an appropriate place and at an appropriate price is a concern State of cold storages is poor- Despite the significant requirement of cold storages from the retail sector, pharmaceutical and chemical sector and the farm sector, where it is estimated that up to 40% of the fruits and vegetables grown in India gets wasted, receptor needs to grow much faster to meet the needs. Multi-modal logistic parks yet to take off- With emerging requirements of integrated logistics, provision of transportation hub, value addition etc. large logistics park were sought to be developed. Consolidation of large land parcels is a significant issue hampering their development. Other issues include the lack of recognition of the concept of logistic park by government.
- 10. Logistichubs P a g e | 10 Tax Structure Related Challenges When crossing borders between states, trucks often have to endure long waiting times at checkpoints because most states have different tax structures. Some states only charge an entry tax, but at most borders all the freight papers need to be checked due to sales tax issues between the states A uniform tax structure to be introduced through the GST is being highlighted as the panacea for the existing situation. If implemented in spirit GST will enable logistics services to be provided without consideration for ex boundaries. Technology and Skills Related Challenges On the technology front the industry now seems to be paying serious attention with use of RFID, vehicle tracking technologies, warehouse management system etc. The skill levels in the logistic industry also require to be upgraded urgently. Also logistic industry is still not looked at as the industry of choice for young graduates thereby making hiring of quality professional manpower challenging. Some of the skills required in this sector are technology skills, driving skills including safety procedures, industry understanding and multi operator’s skills.
- 11. Logistichubs P a g e | 11 Current logistics issues and trends in India Increased outsourcing of logistics services to a developing market There are many logistics service providers consisting of only one or two persons owning one or two trucks which are not very organized and whose workload is very volatile. There also are a few larger companies that operate big fleets of well-coordinated vehicles with different capacities. City level warehousing is often given to small players who have their local warehouses, which then outsource warehouse management to other companies. As soon as the sector consolidates further and major players arise, technologies like GPS tracking, ERP solutions or other IT systems will become more common. Safety issues and inefficient regulations Providers mostly overload trucks and have an enormous rate of death since they mostly do not consider investing in security measures due to cost reasons. There is a high tendency to overloading and exceeding the driving time limits. There is a high rate of accidents at loading facilities and on roads. Only big companies like Tata have their own in-house departments that can manage the risks along the whole supply chain effectively. Coping with infrastructure deficiencies India is considered a manufacturing hub and freight volumes have drastically increased. Also mining has boomed due to several changes in mining policies so that the movement of minerals within India and abroad has increased dramatically. This issue puts lot of pressure on the road and rail networks, especially since illegal mining, which is a big issue in India, is completely handled by road. Bulk is being moved by rail since railway lines can be connected directly to mines or big manufacturing plants. There is work being done in the areas of development of locomotives, manufacturing of coaches, catering on trains, constructing lines, operating services, pricing and scheduling. All in all, there is a huge potential and interest in railways. The use of inland waterways, primary in the east, connecting Calcutta and the ports in Orissa to the mines, has been explored, but inland waterways have been a huge failure
- 12. Logistichubs P a g e | 12 since the water levels are too low and fresh water is rather used for consumption and agriculture than for transportation. Mumbai or Chennai are candidates for being an intermodal hub, because there is a high rate of traffic, industrial activities and a sea port. The infrastructure corridor of Delhi-Mumbai and the related freight corridors for rail are currently being developed. Also between Delhi, Jawaharlal Nehru Port and Calcutta dedicated rail freight corridors are being developed. The involved parties are also planning to build a high number of logistics clusters and container freight stations (CFS) along the corridors. The connectivity from the mines to the Delhi-Mumbai Industrial Corridor is being improved. Other container freight stations are currently being planned. This includes hubs in the Delhi region, at Chennai international airport on the east coast, at the National Capital Region in north central, at Jawaharlal Nehru Port on the west coast and in Chennai on the east coast. Also an aviation hub in Nagpur is being planned. There is a focus on national highway development that includes expressways, super expressways and air linkages. Nashik, Gurgaon and Kochi are new logistics clusters or hubs. A major dry port near Delhi is a hub for distributing within the country. Major issues in cold and food chains The major food crops are in localized pockets near to Delhi and are distributed all over the country from there. The crops need to be delivered to warehouses in order to be processed though. Agricultural SCM is rather unorganized and inefficient and the public distribution system in food SCs is not very effective either. There is a lot of wastage during storage, lead times are high and security issues are not considered. The aim would be to develop good warehouses, cold chains and food chains. Impacts of Challenges Faced India’s logistics sector accounts for 13% of the GDP of India. Major elements of logistics costs typically include transportation, warehousing, inventory management and other value added services such as packaging. The logistic costs as a percentage of total product cost in India is in the range of 4-5 times that in developed countries.
- 13. Logistichubs P a g e | 13 Fuel price hike sharply increases the cost of freight transport. Ever increasing congestions at ports are resulting in high levels of ground rents required to be paid at CFS’s near the port. The high level of logistics costs in the economy adversely impacts the competitiveness of the Indian economy as well as the financial well-being of the individual citizens. An addition to product costs due to inefficient logistics adds to inflation. Wastages lead to scarcity. This makes efforts for reducing logistics costs crucial goals to pursue. The rewards of reduction in logistics costs are manning. The decrease in Logistics costs leads to significant increase in employment opportunities in the economy. It also helps in increasing the trade flows in a country by increasing the inherent competitiveness of the economy. It will lead to decrease in poverty levels in the country through increasing earnings for the poor. Estimated Future Growth The Indian Logistics sector growth depends on the growth of its soft infrastructure like education, training and policy framework as much as the hard infrastructure. It is estimated that the Indian logistics sector will continue to show robust growth of 10-15% annually, leading the pace of growth of the economy at large. Main Demand Drivers With a new government set in place in 2014, many policies are expected to be implemented which will give a fresh impetus to India’s growth engine particularly in the corporate and SME sector which in turn will expand demand for the logistics sector. Revolutionary growth is being seen in e-commerce which is leading to logistics companies responding with new innovations in service since logistics is the most critical ingredient in the success of an online business. Logistics-Future Trends in India India has become the prime destination for logistics service providers all over the world. The demand for logistics services in India has being largely driven by the growth of the economy. The growth is projected at 7-9% in next few years, with the Compounded Annual Growth Rate (CAGR) expected to grow at rate of 7-8%. This
- 14. Logistichubs P a g e | 14 growth is expected to gain greater momentum due to exponential growth of the Indian economy. India is also experiencing a big retail boom as the buying capacity of the middle and upper middle segment of the population have scaled new heights. Many large MNCs from the retail industry are planning to set up operation in India and large local retailers are also planning to expand their operations. There are problems such as complex regulatory compliances and limited adoption and utilization of technology, which has resulted in increased paper work and inability to communicate effectively with customers. The hopes of the logistics sector are kept up by the various upcoming infrastructural projects like logistics parks and hubs and other initiatives by public and private sectors. The Way Forward Increasing competition is forcing manufacturers and retails to increasingly differentiate their products. One of the way through which differentiation is being made is through the supply chain strategies. Little premium is put on service delivery, quality and transparency in logistics services. For instance, dust-proofing at a storage place still does not command the kind of premium in India that it should, and as a result, the logistics service provider does not invest in such provisions. It is well recognized that government is making efforts to make improvements to correct the infrastructure deficit be it in physical transport, warehousing and terminal infrastructure etc. There are other softer changes that are required to be made along with the capacity creation drive to realize the full impact of such changes. These include: Coordination in infrastructure planning: When main network roads are developed the links remain of poor quality. Coordination in infrastructure planning will need to happen not only to truly bottlenecks, but also to avoid overlap and attendant extra costs. Such resultant integration of facilities will help to reduce the high transaction costs prevalent in the economy. Reforms in urban planning: Urban planning today does not appear to factor in the enormous volumes of goods distribution catering to urban conglomerations in terms
- 15. Logistichubs P a g e | 15 of road and peripheral infrastructure resulting in traffic restrictions and serious bottlenecks and logjams. This needs to be paid special attention by our planners. Prevailing topics and institutions of logistics research in India The major areas of research interest at the business and technical oriented departments were found to be: Operations research Supply chain management, related to contracts, reverse logistics, automotive logistics, post logistics, health-care operations and pharmaceutical supply chain, aerospace logistics Closed loop supply chains Heuristics for decision making Optimization and planning of inventory and the food supply chain Warehousing Resource planning Communication networks Facility layout and location problems (facility planning) Risk management in humanitarian supply chains Scheduling in the supply chain Pricing and revenue management Planning and control in manufacturing Quality management and service quality Operations research applications Rural technology Supply chain modelling, risks and issues for logistics management and green supply chains Computer simulation of the distribution chain The transport-oriented institutions are specialized in: Infrastructure and transportation systems Transport policies and logistics sector policies: optimizing the regulation structure, liberalizations as well as barrier analysis
- 16. Logistichubs P a g e | 16 Designing transportation networks for freight transport modes (rail, water, road, air) Optimizing the supply chain and logistics management practices related to infrastructure Policy recommendation and consultancy Transportation operations and planning Railway operations Food supply chain management Operations research applications in the aviation sector Modelling of traffic flow and driver behaviour Origin-destination models regarding freight Solid waste management Current trends in logistics research Researchers are very active in the field of environment and resource protection. In total 21 projects of 11 institutions are related to this topic. They are working on green logistics and technologies, intermodal transportation systems, urban planning and reducing the carbon impact in the field of transportation and logistics as well as reverse logistics including environmental aspects. Also closed loop supply chains from a waste perspective and the construction and optimization of transportation infrastructure to reduce the carbon foot print are important topics. When it comes to the topic of innovations in technology there are only 5 institutions active in this field. They develop RFID systems, ICTs and green channelling systems to improve performance in the transportation sector and the supply chains in cities. 4 departments concentrate on politics, regulations and compliance with regard to logistic issues. They currently work in the field of public private partnerships in the transportation sector and the standardization of regulations at national level (e.g. toll structure). Infrastructure development and improvement of material and transport flows is worked on by 4 institutions. They focus on port and railway optimization, improving the hinterland infrastructure, intermodal transport, railway and port connectivity and urban logistics planning regarding last mile distribution as well as logistics nodes. Aside from intermodal transport, they also try to promote water-based transport.
- 17. Logistichubs P a g e | 17 Logistics networks and clusters in India Logistics networks and clusters are found in the field of transportation and logistics. There are several logistics hubs in Mumbai, Calcutta, New Delhi and Chennai. Academic clusters for logistics and supply chain management consist mainly of the IITs and IIMs as well as NITs (e.g. Bangalore, New Delhi, Calcutta, Lucknow, Ahmedabad, Kharagpur, Madras, Mumbai and Chennai). Concerning transport infrastructure and transportation research, the main clusters are in Ahmedabad, Bangalore, Chennai and Mumbai. IIT Delhi has some very good programs on transport safety and sustainable transport. IIT Madras has specializations in urban transport and the best qualitative research is carried out by the IIMs in Bangalore and Ahmedabad
- 18. Logistichubs P a g e | 18 Conclusion The future of the Indian Logistics Industry lies ultimately in value propositions for the customer. The future is bright for logistics industry in India- the expectation is that a tipping point for the industry will soon be reached which will propel it to greater heights. References Logistics in India: Challenges and Scope by S. Ramachandran, Director, AMET B-School, Chennai, India. Mayur S Nakhava,MBA Student, AMET B-School, Chennai, India. Kumar Pratik, MBA Student, AMET B-School, Chennai, India. http://www.businessvibes.com/blog/report-global-logistics-industry-outlook#.dpuf http://www.researchandmarkets.com/reports/1287456/ http://www.tradeportalofindia.org/Countryprofile/FDIStaistics.aspx?CountryCode=32 &SectorCode=0&CurrentMenu=FDIStaistics Indian Chamber Of Commerce Transport Intelligence www.ibef.org