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Logistic management of GATI
Dell
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Submitted by :- Vinay Tiwari
Microsoft [Type the company address] [Type the phone number] [Type the fax number] 3/27/2012
INTRODUCTION
Logistics is the management of the flow of goods, information and other resources between the point of origin and the point of consumption in order to meet the requirements of consumers (frequently, and originally, military organizations). Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and occasionally security. Logistics is a channel of the supply chain which adds the value of time and place utility. Today the complexity of production logistics can be modelled, analyzed, visualized and optimized by plant simulation software.
LOGISTICS MANAGMENT
Logistics management is that part of the supply chain which 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 consumption in order to meet customer and legal requirements. A professional working in the field of logistics management is called a logistician.
Origins and definition
The term logistics comes from the Greek logos (λόγος), meaning "speech, reason, ratio, rationality, language, phrase", and more specifically from the Greek word logistiki (λογιστική), meaning accounting and financial organization. Logistics is considered to have originated in the military's need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, military officers with the title Logistikas were responsible for financial and supply distribution matters. having to do with procuring, maintaining and transporting materiel, personnel and facilities." Another dictionary definition is "the time-related
positioning of resources." As such, logistics is commonly seen as a branch of engineering that creates "people systems" rather than "machine systems".
TYPES OF LOGISTICS
Cargo (or freight) is goods or produce transported, generally for commercial gain, by ship, aircraft, train, van or truck. In modern times, containers are used in most intermodal long-haul cargo transport.
Marine
Trains are capable of transporting large numbers of containers that Come from shipping ports. Trains are also used for the transportation of steel, wood and coal. They are used because they can carry a large amount and generally have a direct route to the destination. Under the right circumstances, freight transport by rail is more economic and energy efficient than by road, especially when carried in bulk or over long distances. The main disadvantage of rail freight is its lack of flexibility. For this reason, rail has lost much of the freight business to road transport. Rail freight is often subject to transshipment costs, since it must be transferred from one mode of transportation to another. Practices such as containerization aim at minimizing these costs. Many governments are currently trying to encourage shippers to use trains more often because of the environmental benefits.
Road Many firms, like Parcelforce or FedEx, transport all types of cargo by road. Delivering everything from letters to houses to cargo containers, these firms offer fast, sometimes same-day, delivery. A good example of road cargo is food, as supermarkets require deliveries every day to
keep their shelves stocked with goods. Retailers of all kinds rely upon delivery trucks, be they full size semi trucks or smaller delivery vans. Shipment categories
Freight is usually organized into various shipment categories before it is transported. An item's category is determined by: the type of item being carried. For example, a kettle could fit into the category 'household goods'. ·how large the shipment is, in terms of both item size and quantity. ·how long the item for delivery will be in transit. Shipments are typically categorized as household goods, express, parcel, and freight shipments: ·Household goods (HHG) include furniture, art and similar items. ·Very small business or personal items like envelopes are considered overnight
express or express letter shipments. These shipments are rarely over a few kilogams or pounds and almost always travel in the carrier’s own packaging. Express shipments almost always travel some distance by air. An envelope may go coast to coast in the United States overnight or it may take several days, depending on the service options and prices chosen by the shipper. ·Larger items like small boxes are considered parcels or ground shipments. These shipments are rarely over 50 kg (110 lb), with no single piece of the shipment weighing more than about 70 kg (154 lb). Parcel shipments are always boxed, sometimes in the shipper’s packaging and sometimes in carrier-provided packaging. Service levels are again variable but most ground shipments will move about 800 to 1,100 kilometres (497 to 684 mi) per day. Depending on the origin of the package, it can travel from coast to coast in the United States in
about four days. Parcel shipments rarely travel by air and typically move via road and rail. Parcels represent the majority of business-toconsumer (B2C) shipments.
Less-than-truckload freight
Less than truckload (LTL) cargo is the first category of freight shipmen, which represents the majority of freight shipments and the majority of business-to-business (B2B) shipments. LTL shipments are also often referred to as motor freight and the carriers involved are referred to as motor carriers. LTL shipments range from 50 to 7,000 kg (110 to 15,000 lb), being less than 2.5 to 8.5 m (8 ft 2.4 in to 27 ft 10.6 in) the majority of times. The average single piece of LTL freight is 600 kg (1,323 lb) and the size of a standard pallet. Long freight and/or large freight are subject to extreme length and cubic capacity surcharges. Trailers used in LTL can range from 28 to 53 ft (8.53 to 16.15 m). The standard for city deliveries is usually 48 ft (14.63 m). In tight and residential environments the 28 ft (8.53 m) trailer is used the most. The shipments are usually palletized, shrink-wrapped and packaged for a mixedfreight environment. Unlike express or parcel, LTL shippers must provide their own packaging, as carriers do not provide any packaging supplies or assistance. However, circumstances may require crating or other substantial packaging. Air freight
Air freight shipments are very similar to LTL shipments in terms of size and packaging requirements. However, air freight or air cargo shipments typically need to move at much faster speeds than 800 km or 497 mi per day. Air shipments may be booked directly with the
carriers, through brokers or with online marketplace services. While shipments move faster than standard LTL, air shipments don’t always actually move by air. Truckload freight In the United States, shipments larger than about 7,000 kg (15,432 lb) are typically classified as truckload (TL) freight. This is because it is more efficient and economical for a large shipment to have exclusive use of one larger trailer rather than share space on a smaller LTL trailer. The total weight of a loaded truck (tractor and trailer, 5-axle rig) cannot exceed 36,000 kg (79,366 lb) in the United States{fact}. In ordinary circumstances, longhaul equipment will weigh about 15,000 kg (33,069 lb), leaving about 20,000 kg (44,092 lb) of freight capacity. Similarly a load is limited to the space available in the trailer, normally 48 ft (14.63 m) or 53 ft (16.15 m) long, 2.6 m (102.4 in) wide, 2.7 m (8 ft 10.3 in) high and 13 ft 6 in/4.11 m high over all. While express, parcel and LTL shipments are always intermingled with other shipments on a single piece of equipment and are typically reloaded across multiple pieces of equipment during their transport, TL shipments usually travel as the only shipment on a trailer. In fact, TL shipments usually deliver on exactly the same trailer as they are picked up on. Shipping costs
Often, an LTL shipper may realize savings by utilizing a freight broker, online marketplace or other intermediary, instead of contracting directly with a trucking company. Brokers can shop the marketplace and obtain lower rates than most smaller shippers can obtain directly. In the LTL marketplace, intermediaries typically receive 50% to 80% discounts from published rates, where a small shipper may only be offered a 5% to 30% discount by the carrier. Intermediaries are licensed by the DOT and have requirements to provide proof of insurance.
Truckload (TL) carriers usually charge a rate per kilometre or mile. The rate varies depending on the distance, geographic location of the delivery, items being shipped, equipment type required, and service times required. TL shipments usually receive a variety of surcharges very similar to those described for LTL shipments above. In the TL market, there are thousands more small carriers than in the LTL market. Therefore, the use of transportation intermediaries or brokers is extremely common. Another cost-saving method is facilitating pickups or deliveries at the carrier’s terminals. By doing this, shippers avoid any accessorial fees that might normally be charged for liftgate, residential pickup/delivery, inside pickup/delivery, or notifications/appointments. Carriers or intermediaries can provide shippers with the address and phone number for the closest shipping terminal to the origin and/or destination. Shipping experts optimize their service and costs by sampling rates from several carriers, brokers and online marketplaces. When obtaining rates from different providers, shippers may find quite a wide range in the pricing offered. If a shipper uses a broker, freight forwarder or other transportation intermediary, it is common for the shipper to receive a copy of the carrier's Federal Operating Authority. Freight brokers and intermediaries are also required by Federal Law to be licensed by the Federal Highway Administration. Experienced shippers avoid unlicensed brokers and forwarders because if brokers are working outside the law by not having a Federal Operating License, the shipper has no protection in the event of a problem. Also, shippers normally ask for a copy of the broker's insurance certificate and any specific insurance that applies to the shipment.
Security concerns Governments are very concerned with the shipment of cargo, as it may bring security risks to a country. Therefore, many governments have enacted rules and regulations, administered by a customs
agency, to the handling of cargo to minimize risks of terrorism and other crime. Of particular concern is cargo entering through a country's borders. The United States has been one of the leaders in securing cargo. They see cargo as a concern to United States national security.
After the terrorist attacks of September 11th, the security of this agnitude of cargo has become highlighted on the over 6 million cargo containers enter the United States ports each year. The latest US Government response to this threat is the CSI: Container Security Initiative. CSI is a program intended to help increase security for containerized cargo shipped to the United States from around the world.
Vision and Mission of Gati
Be a globally preferred provider of India-centric supply chain services and solutions, and a leader in the Asia Pacific region. Delight customers with quality service by setting new trends through innovation and technology. Be the most preferred organization for all stakeholders.
Be a responsible corporate citizen with unwavering commitment to environmental protection and conservation They are based on a desire to achieve sustainable heights in business and encompass a set of customer sensitive corporate values on attitude, behaviour, action and delivery. Gati is the leader in India in express distribution and supply chain solutions in India with a reach unmatched in the country Providing total end to end logistics solutions for businesses across varied verticals Committed to deliver innovation and service excellence Collaborates with customers to make their businesses
high performance driven Ability to mobilize the right people, skills and technologies to deliver results as desired by the customers Gati started operations in 1989 as a door-to-door calgo company.
Overview of Logistics Market
The size of the Indian logistics market was estimated at US$3.5 trillion in 2005.41India’s growing domestic market and external trade, particularly in textiles, automotive, auto ancillary, and engineering goods have contributed to a massive boost in the logistics industry. India’s container traffic grew faster than the global container traffic during the past 6-7 years. India’s containerization has over 70% of total exported cargo and around 40% imported cargo. The Indian government is making great efforts to improve trade by privatizing ports, increasing the number of gateway ports, investing in highway projects, streamlining customs and excise procedures, implementing EDI systems and improving the rail network. Containerization at major ports of India contributed about 11% of total cargo handled at those ports in 2000-01; it increased to 16% in 2005-06 and is estimated to further increase to 22.7% by 2010-11.42 Although there has been impressive growth in container traffic of over 15% per annum over the past five years, this is far less than international trends. The turnover time at ports came down from 3.7 days in 2002– 03 to 3.5 days in 2005–06, but increased marginally to 3.6 days in 2006-2007.43 The pre-berthing waiting time at major ports on port account, however, increased from 8.77 hours in 2005-06 to 10.05 hours in 2006- 07. The logistics cost as a percentage of the gross domestic product (GDP) stood at 13% in India compared to less than 10% of GDP in almost all of Western Europe and North America. According to industry analysts India spends US$30 billion more than it should on logistics due to inefficiencies in the system, such as high turnaround time at ports, lower average trucking speeds and the high cost
of administrative delays.44 India’s indirect tax regime discouraged large centralized warehouses and led over time to fragmentation in the warehousing sector.45 The transport sector’s contribution to India’s GDP was estimated to be around 6.6% in 2005-06, and road transport has a dominant role in this contribution with a share of 4.7% in India’s GDP.46 Some studies state that the Indian logistics industry is at an inflection point and predict that it will reach a market size of over $125 billion in year 2010. 47
Road
India has one of the largest road networks in the world, aggregating to about 3.34 million kilometers at present.48 The road network comprises 66,754 km of National Highways, 1,28,000 km of State Highways, 4,70,000 km of Major District Roads and about 26,50,000 km of Other District and Rural Roads. Out of the total length of National Highways, about 32 per cent is single lane/ intermediate lane, about 55 per cent is standard 2-lane and the balance 13 per cent is 4-lane width or more. Roads are the most popular mode of transportation in India, accounting for about 85 per cent of passenger traffic and 70 per cent of freight traffic. The road freight industry in India is estimated to be worth about INR 1.42 trillion and is growing at a rate about 6-8 per cent per year. The Ministry of Road Transport & Highways (MRTH) formulates policies on road transport and oversees the development and maintenance of national highways.
The Department of Road Transport & Highways, an apex organization under the Central Government, is entrusted with the task of formulating and administering, in consultation with other Central Ministries/Departments, State Governments and individuals, the policies for road transport. It is also responsible for road safety in the country. The state governments oversee roads in their respective
states, and issues related to rural roads such as policy development and monitoring are under the jurisdiction of the Ministry of Rural Development. The National Highways Act, 1956 was amended in 1995 to encourage private sector participation in the development, maintenance and operation of national highway projects; the private sector was allowed to invest in national highway projects, levy, collect and retain fees from user charges, and could regulate traffic. The industry has traditionally been extremely fragmented; transporters with fleets smaller than five trucks account for over twothirds of the total trucks owned and operated in India and make up 80 per cent of revenues. The national highways and state highways account for less than 6 per cent of the total roads in India, but carry about 80 per cent of total traffic. There are a number of trends indicating that road traffic has expanded faster than capacity. • The estimated average daily traffic volume on the national highway (2-lane) network is 39,000 passenger car units (PCUs) of motorized and nonmotorized traffic as against a capacity of 15,000 PCUs. • Commercial vehicles in India cover 250-300 km at an average speed of 30 km in a single day as against 600 km (average speed of 60-70 km) in the developed countries. However, the government has taken several initiatives under the National Highway Development Project (NHDP) to develop highways in India. As of November 30,2007, 7,962 km of National Highways under the NHDP project have been completed,the bulk of which (5,629 km) lies on the Golden Quadrilateral (GQ). About 7,744 km of National Highways are under construction. Nearly 96 per cent of the work on the GQ was completed by November 2007 and the North-South and East-West corridors are expected to be completed by December 2009.
Rail India has the world’s second largest rail network spread over 81,500 km and covering around 7000 stations. The government of India owns and manages Indian Railways via the Ministry of Railways rather than a private company. Railways are split into 16 zones and the Railway Board looks after the policy and operations of the Indian Railways. In addition, there are production units and subsidiary organizations such as Indian Railway Construction (IRCON), Rail India Technical and Economic Services (RITES), Container Corporation of India (CONCOR), and Center for Railway Information System (CRIS) each of which undertakes specialized jobs. Rail freight traffic revenues stood at Rs. 350 billion in 2006. During April-November 2007, the total revenue-earning freight traffic grew at 8.2 per cent compared to 9.19 per cent during the corresponding period of the previous year. Most freight traffic is carried on electric traction. However, only 28 per cent of the Indian rail network is electrified in contrast to 100 per cent electrification in most developed economies.52 Roads have dominated railways both in terms of passenger traffic and the amount of freight carried The Indian Railways have been taking proactive initiatives in the area of tariff and fare fixation, and commercial practices. The freight structure has been rationalized, reducing the number of classes of commodities for charging purposes from 59 to 32. The rationalization of the fare and freight structure continued during 2007-08. Commodities are placed into different classes for the purpose of fixing tariffs. Freight movements are computerized, and there are new zones and divisions to ensure customer-friendly operations.53 Some of the other proposals to transform Indian railways include
introduction of higher axle load, double stack containers and modernization of track, bridge, and telecommunications. The freight-carrying capacity of the railways is to be increased in the coming years by the construction of Dedicated Freight Corridors (DFCs). The railways has proposed a 2,700-kilometer-long railway line project at an investment of more than Rs. 28,000 crore which consists of a 1,232-km-long Eastern Corridor (from Ludhiana toSonnagar) in Phase I and a 1,469-km-long Western Corridor from Jawaharlal Nehru Port area (Mumbai to Dadri/ Tughlakabad) in Phase II. The development of Logistics Parks on the DFC has also been proposed.54 A special-purpose vehicle (SPV) called Dedicated Freight Corridor Corporation of India Limited (DFCCIL) has been formed to implement the project.
Sea/Maritime Freight The dominance of India’s maritime transport is often attributed to a strategic location, a long coastline of 7,516 km and an established port infrastructure, comprising major ports and minor ports.55 In 2006, the Indian shipping fleet was ranked 20th in terms of its fleet size in gross tonnage (gt) by flag of registration, constituting 1.16 per cent of the world fleet size. In 2007-08, up to October 2007, the cargo handled by major ports registered a growth of 13.9 per cent against 9.5 per cent in the corresponding seven months of 2006-07. JNPT, India’s biggest container port, handled 3298 TEUs in 2006-2007 and 2667 TEUs in 2005-06. The annual aggregate cargo handling capacity of major ports increased from 456.20 MT per annum (MTPA) in 2005-06 to 504.75 MTPA in 2006-07 and the average output per ship berth-day improved from 9,267 tonnes in 2005-06 to 9,745 tonnes in 2006-07. However, the average turnaround time increased marginally from 3.5 days to 3.6 days in 2006-07. The average turnaround time in major
ports of India varies considerably across major ports, from 1.67 days in JNPT to 5.46 in Kandla.57 The average turnaround time for major ports in 2006-2007 and 2005-06 is summarized in Table 2. Average Turnaround Time at Major Ports of India Port 2006-07 2005-06 Kolkata 3.89 4.12 Haldia 3.97 4.00 Paradip 3.54 3.56 Vizhakapatnam 3.65 3.80 Ennore 1.89 2.23 Chennai 3.40 3.30 Tuticorin 3.67 2.83 Cochin 2.19 2.13 New Mangalore 3.14 3.00 Marmagao 4.46 4.08 Mumbai 4.63 4.09 Jawaharlal Nehru Port Trust (JNPT) 1.67 1.96 Kandla 5.46 4.39 All Ports 3.62 3.50 Source: Indian Ports Authority, Major Ports Profile, (2006-07). Note: Figures are in number of days.
The Ministry of Shipping oversees and formulates policies for the development of the shipping and port sectors. The 12 major ports are statutory bodies (trusts) Administered by the Government of India under the Indian Ports Act, 1908 and the Major Port Trust Act, 1963. The Indian Ports Act (1908) lays down rules regarding safety of shipping and conservation of ports for the entire port sector and regulates matters pertaining to the administration of port duties, pilotage and other charges. The Major Port Trust Act (1963) lays down the institutional framework for the major ports in India. The working conditions of port labor are
governed by the Dock Workers (Regulation and Employment) Act of 1948, which stipulates the terms and conditions of port labor employment, service rules standards and other welfare issues in the interest of port and dockworkers. The Act is very protective of workers’ rights and offers them complete job security. The Indian government has made amendments to the Merchant Shipping Act (1958) to encourage the growth and modernization of the industry. Some of these changes include simplification of regulatory procedures for raising resources from commercial markets, retention of sales proceeds from ships abroad, automatic approval for foreign direct investment up to 100 per cent FDI, repair of ships in any foreign shipyard without seeking prior approval of the government, and delicensing of many liner routes.58 The government adopted the tonnage tax system in April 2004, and under the new regime ship-owners can opt for the tonnage tax whereby income tax is levied on the basis of income of the Net Tonnage (NT) according to a fixed scale. This is estimated to have reduced the incidence of tax by around 3 per cent and led to an immediate increase in Indian-owned tonnage.
Privatization of port facilities and services has gathered momentum in India. Depending on the nature of the facility/ service, private operators can enter into a service contract, a management contract, a concession agreement or a divestiture to operate port services. The changes and liberalization of shipping services and ports offer new opportunities for logistics companies. Logistic companies in the marine based segments are expanding their fleets and entering into new ventures. For instance, Varun Shipping is procuring offshore vehicles, while NYK line has tied up with Tata Steel for its bulk cargo requirements. A number of shipping and port MNCs are focusing on Indian ports and there is huge interest in developing third and fourth container terminals of JNPT. JNPT port has signed a license agreement with Gateway Terminals India, a consortium led by the Danish major, Maersk Sealand, to set up thethird container terminal at the port. Recently, there were reports that the port of
Rotterdam and Sohar Industrial Port have formed a consortium with Sea King Infrastructure Limited (SKIL) to develop Positra port in Gujarat. Rotterdam port would provide its expertise in developing, managing and operating the terminal, while Sohar will use its world-wide commercial linkages to help establish linkages with international maritime networks. In spite of these positive developments, Indian ports have a long way to go to reach international standards. Despite having adequate capacity and modern handling facilities, the average turnaround time of 3.6 days, compared with 10 hours in Hong Kong, undermines the competitiveness of Indian ports. A report by the Ministry of Shipping (2007) analyzed the efficiency of the major ports in the country and compared the performance of Indian ports to the ports of Rotterdam and Singapore. It was observed that the dwell time for containers at major Indian port container terminals is 1.88 days for import and 3.78 days for export, whereas in Singapore it is 0.6 days for import (trans-shipment) and 0.6 days for export (trans-shipment). A detailed time-study revealed that although the total time taken by the port authority is 3.5 to 5.5 hrs for import and 3.3 to 5.3 hrs for export, the rest of the time the container dwells in the port is on account of other stakeholders like shipping agents, customs, clearing agents, transporters, for payment of port charges and arrangement of transport. There are significant differences between Indian and international ports, especially regarding connection to the hinterland and level of computerization. In the port of Rotterdam, enterprise resource planning software was implemented years ago, while it is still being envisaged for implementation in India. EDI implementation is also partial in Indian ports, with many human interfaces and manual exchange of documents. The other major differences between Indian ports and the Rotterdam port are summarized in below.
S. No.
Indian Ports
Rotterdam Port
1. Evacuation/ Aggregation of cargo Cargo is predominantly through rail and road only.
Bulk cargo and container movement through barges accounts for 50-60% of transportation because of excellent inland water-networking. Intermodal connectivity by road/ rail is seamless.
2. Level of Mechanization The extent of mechanization is low in Indian ports. in
The level of mechanization is very with the latest technologies applied all spheres.
3. Location of port-based industries Most manufacturing firms are located away from the ports.
Most manufacturing units are located within the ports so evacuation is very fast.
4. Availability of storage space Land is very scarce in ports. So evacuation has to take place.
As so much land is available at Rotterdam port, the longer the cargo lies within the terminal, the higher the revenue to the terminal operator.
5. Availability of Resources There are dedicated terminals with fewer berths.
There is no concept of pre-berthing detentions as berths are waiting for the ships and they have longer quay lengths.
Warehousing Warehousing is an important segment of logistics and consists of warehousing related to distribution (trans-shipment warehouse), and terminals used for bulking/debulking and temporary storage. The size of the warehousing segment in India was estimated to be Rs. 1.2 trillion in 2006.63 The warehousing sector is highly fragmented due to India’s indirect tax structure. Since taxes paid on cross-border sales
are higher than local tax charges, most companies prefer to set up small warehouses across different states rather than large centralized set-ups. This leads to small-scale, fragmented warehouses, with corresponding inefficiencies. The enactment of the Warehousing (Development and Regulation) Act in December 2007 was an important initiative to regulate the warehousing business. The Act seeks to register warehouses issuing negotiable warehouse receipts and also allows registration of accreditation agencies for warehouses. The Central and State Governments presently dominate the warehousing industry, both as clients and as service providers. The Central Warehousing Corporation (CWC) is the largest provider of warehousing services in India and operates 517 warehouses across the country with a storage capacity of 10.3 million tonnes.64 MCXowned National Bulk Handling Corporation is becoming a serious player in the industry followed by NCDEX-managed National Collateral Management Services. Most third-party logistics providers including EU companies such as Maersk Logistics India also provide storage and warehousing facilities. However, private sector participation has been limited to date due to scarcity of land, lack of prescribed standards and uniform practices for quality verification, lack of a uniform accreditation body in the warehousing sector, etc.
Third-Party Logistics Providers (3PL) in India
Third-party logistics (3PL)/outsourced logistics is the outsourcing of a company's logistics operations to a specialized firm that provides multiple logistics instead of having a business unit in-house to oversee its supply chain and transportation of goods. Third-party logistics is still at a nascent stage in India. According to Data monitor, outsourced logistics represents around one-quarter of the entire $90 billion Indian logistics market and will grow at a compound annual
growth rate (CAGR) of over 16 per cent from 2007-10. The 3PL industry in India was pioneered by global logistics majors – Indian subsidiaries of multinational companies in the automobile, electronics and FMCG sectors were the main users of specialist logistics service providers in the past. Frost & Sullivan identified the auto industry as the largest end-user industry for 3PL services in India.65 Expansion of manufacturing facilities by multinational automobile makers, like Suzuki, Honda, and Ford indicates huge potential for 3PL providers. The number of participants in the 3PL industry grew to more than 400 in 2005.66 The Indian 3PL industry can be divided into three distinct tiers – national major 3PLcompanies with nationwide presence, regional 3PL companies with strong presence in one or two regions, and small remote 3PL companies. There are several 3PL companies from the EU with a nationwide presence operating in India, including Maersk Logistics, Geodis, DSV Frans Maas and Schenker logistics. 3PL providers in India face several challenges due to the huge diversity in geographic conditions, consumer habits, and infrastructure conditions across the country. Logistics operations in each state require a state-specific suitable model that facilitates effective storage and transportation of goods mostly sold in that state, making it difficult to adopt a uniform logistics model. Infrastructure limitations in India, which limit the scope of logistics services as a package, are another concern for 3PL service providers. Barriers in India
Road The major barrier to development of the road industry in India is the fragmented industry structure and dominance of a large number of small unorganized operators.
The large number of operators has been the result of lower capital requirements, ease of obtaining truck driving licenses and permits, and little expertise required in terms of educational skills. The small operators are involved mainly in physical haulage and depend on brokers and other fleet operators who, in turn, depend on booking agents to secure business; they are not in a position to perform the functions of aggregating, handling, and marketing. The middlemen/ intermediaries, which include the booking agents and the brokers, are the dominant players in the market and often fix freight rates. Such practices result in higher prices for the end user, lower profitability for truck operators, lower capacity utilization and poor quality of services There are a number of barriers to inter-state movement of road freight in India. Freight vehicles are detained to check essential documents such as the registration book, driving license, permits (RTO checking) and also to check payment of commercial taxes such as sales tax, octroi and other local levies. In addition, detentions take place for booking traffic rule violations (police checking) and also at tate borders (Border Post checking). Such barriers result in huge delays and transactions costs, and reduce the international competitiveness of logistics firms.
Rail
The major problem in rail is the lack of a dedicated freight corridor. Indian Railways (IR) has a large number of social obligations such as provision of widespread access, carriage of essential bulk goods and low-cost passenger service. It fulfils its social service obligation by cross-subsidizing from freight to passengers which results in inflated freight tariffs.91 The railway sector further suffers from severe financial constraints due to the politically-determined fare structure as well as wasteful operating practices. Resources are typically spread thin to respond to political demands for new passenger trains at the cost of investments in rail freight carriers.
Inadequate rail corridors lead to massive delays, even for transportation between major Indian cities; for instance, the logistics survey points out that cargo takes 5-6 days to reach Delhi from Mumbai by rail. The second issue raised by logistic companies is of connectivity between railways and ports. The absence of proper connections leads to greater delays when rail transport is used; for instance, companies report that in Mumbai, Panvel has only a single track line that is directly connected to JNPT port. Overall, however, logistics companies report a lower incidence of problems with rail compared to road. The issues of bribes and multiple taxes seem to make road transport a bigger source of additional delay and costs for logistics operators compared to rail.
Sea/Maritime The primary survey reveals that the major problem faced by logistic companies is congestion at ports. Most companies feel that existing ports are inadequately equipped to handle increasing sea-traffic. Sea cargo not only faces long clearance times, but also problems such as non-availability of containers, erratic window/idle time for vessels, and frequent breakdown of cargo handling equipment. On the shipping side, companies report delays due to lack of main lines in India; containers from an Indian port have to be trans-shipped and go through a hub port which considerably increases the time in transit. The other important issue raised by companies relates to connectivity of ports; ports are poorly connected to the hinterland and there are no assured timings for connections with container trains. Some companies mention problems with manpower at the ports. Some of these problems include constant labor union issues, lack of skilled labor for pilotage and operation of equipment (in spite of the large labor force), and absence of round-the-clock workers.
Warehousing
The survey revealed inventory management is a problem in warehousing. Warehouses in India are extremely fragmented and on a small scale. Since warehousing facilities are small, they are typically managed by local clearing and forwarding (C&F) agents who have poor knowledge of warehousing technology. Companies also report high risk of damage to cargo due to poor warehousing practices. Finally, 3PL providers complained of difficulty in acquiring land for warehouses. The right place for warehouses are areas in proximity to air/sea ports; however, such areas are not easily available to private companies, so companies settle for warehouses that are one-tenth of the planned capacity due to land problems. 3PL logistics providers are particularly affected since often they cannot offer warehousing services and it impedes their ability to provide complete logistics solutions to clients.
HR in Gati
Gati believed in long term employee relationship. Organizational commitment win-win situation, multiskilling of employees, and long term employment were the key ingredients of human relations function. Attitude was given more importance in employee recruitment than qualification and expertise. On every possible occasion, Agarwal made it explicit that Gati was a caring Organization. Whenever possible, food was cooked and served to employee in all Gati offices. while the informal set and atmosphere worked well for quite some time, major reforms will not initiated between 2000 and 2003 to enhance competitiveness of Gati in the changing business environment. Agarwal himseif personally met the family members of an employee in case he/she lost life in a (major) road accident. This was systematically followed up. Today (2005), where Agarwal cannot
visit the family of the victim, a senior employee of the company is deputed. Most of the Gati employees (until 1994) were inherited from TCI. There was a need to enhance their competency level. Management graduates and engineers were recruited from the campuses and placed in executive or managerial cadre. To keep a check on the number of employees, a performance-based separation scheme was implemented. The separated employees were given option opportunity ,and financial support to work for Gati as entrepreneurs. The gender mix in Gati was skewed towards males.Very few women worked for Gati. To bring an element of improvement in social behaviour within Gati (in terms of spoken language marmers, etc.) w omen employees were inducted as management and graduate hainees (this initiative was based on the hope and assumption that, in the presence of women, male employees would tend to be more gentlel). The entrylevel qualification was increased from school pass (highers econdary qualified) to graduation. Recruitment as need based. Advertisements, using manpower consultants, and visiting campuses were the modes of recruitment. Understanding of the service industry, ability to sell a product, innovativeness, business knor4edge and exposure to functional areas of business, ofter skills (like communication and sensitivity), and ability to work in a team were the range of skills sought in a fresh recruit. . Every new entrant went through a seven-day induction course, at a place other than his/her place of posting. Standard training modules on marketing, customer orientation, and service quality were routinely offered. Several executives were nominated for management courses in reputed Indian educational institutions. The performance appraisal system was changed from the managing director reviewing the performance with every regional manager to a broad based open appraisal system. Two broad based review committees did the appraisal. A central review committee and a regional review committee reviewed the
performance of every manager along with the managing director in an open environment. Welfare measures included financial support on a need basis. AIl employees and family including parents were covered through insurance policies. For staff, all statutory requirements were provided. Remuneration and perks for senior executives are comparable with the best in the industry.
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Submitted by :- Vinay Tiwari
Microsoft [Type the company address] [Type the phone number] [Type the fax number] 3/27/2012
INTRODUCTION
Logistics is the management of the flow of goods, information and other resources between the point of origin and the point of consumption in order to meet the requirements of consumers (frequently, and originally, military organizations). Logistics involves the integration of information, transportation, inventory, warehousing, material handling, and packaging, and occasionally security. Logistics is a channel of the supply chain which adds the value of time and place utility. Today the complexity of production logistics can be modelled, analyzed, visualized and optimized by plant simulation software.
LOGISTICS MANAGMENT
Logistics management is that part of the supply chain which 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 consumption in order to meet customer and legal requirements. A professional working in the field of logistics management is called a logistician.
Origins and definition
The term logistics comes from the Greek logos (λόγος), meaning "speech, reason, ratio, rationality, language, phrase", and more specifically from the Greek word logistiki (λογιστική), meaning accounting and financial organization. Logistics is considered to have originated in the military's need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, military officers with the title Logistikas were responsible for financial and supply distribution matters. having to do with procuring, maintaining and transporting materiel, personnel and facilities." Another dictionary definition is "the time-related
positioning of resources." As such, logistics is commonly seen as a branch of engineering that creates "people systems" rather than "machine systems".
TYPES OF LOGISTICS
Cargo (or freight) is goods or produce transported, generally for commercial gain, by ship, aircraft, train, van or truck. In modern times, containers are used in most intermodal long-haul cargo transport.
Marine
Trains are capable of transporting large numbers of containers that Come from shipping ports. Trains are also used for the transportation of steel, wood and coal. They are used because they can carry a large amount and generally have a direct route to the destination. Under the right circumstances, freight transport by rail is more economic and energy efficient than by road, especially when carried in bulk or over long distances. The main disadvantage of rail freight is its lack of flexibility. For this reason, rail has lost much of the freight business to road transport. Rail freight is often subject to transshipment costs, since it must be transferred from one mode of transportation to another. Practices such as containerization aim at minimizing these costs. Many governments are currently trying to encourage shippers to use trains more often because of the environmental benefits.
Road Many firms, like Parcelforce or FedEx, transport all types of cargo by road. Delivering everything from letters to houses to cargo containers, these firms offer fast, sometimes same-day, delivery. A good example of road cargo is food, as supermarkets require deliveries every day to
keep their shelves stocked with goods. Retailers of all kinds rely upon delivery trucks, be they full size semi trucks or smaller delivery vans. Shipment categories
Freight is usually organized into various shipment categories before it is transported. An item's category is determined by: the type of item being carried. For example, a kettle could fit into the category 'household goods'. ·how large the shipment is, in terms of both item size and quantity. ·how long the item for delivery will be in transit. Shipments are typically categorized as household goods, express, parcel, and freight shipments: ·Household goods (HHG) include furniture, art and similar items. ·Very small business or personal items like envelopes are considered overnight
express or express letter shipments. These shipments are rarely over a few kilogams or pounds and almost always travel in the carrier’s own packaging. Express shipments almost always travel some distance by air. An envelope may go coast to coast in the United States overnight or it may take several days, depending on the service options and prices chosen by the shipper. ·Larger items like small boxes are considered parcels or ground shipments. These shipments are rarely over 50 kg (110 lb), with no single piece of the shipment weighing more than about 70 kg (154 lb). Parcel shipments are always boxed, sometimes in the shipper’s packaging and sometimes in carrier-provided packaging. Service levels are again variable but most ground shipments will move about 800 to 1,100 kilometres (497 to 684 mi) per day. Depending on the origin of the package, it can travel from coast to coast in the United States in
about four days. Parcel shipments rarely travel by air and typically move via road and rail. Parcels represent the majority of business-toconsumer (B2C) shipments.
Less-than-truckload freight
Less than truckload (LTL) cargo is the first category of freight shipmen, which represents the majority of freight shipments and the majority of business-to-business (B2B) shipments. LTL shipments are also often referred to as motor freight and the carriers involved are referred to as motor carriers. LTL shipments range from 50 to 7,000 kg (110 to 15,000 lb), being less than 2.5 to 8.5 m (8 ft 2.4 in to 27 ft 10.6 in) the majority of times. The average single piece of LTL freight is 600 kg (1,323 lb) and the size of a standard pallet. Long freight and/or large freight are subject to extreme length and cubic capacity surcharges. Trailers used in LTL can range from 28 to 53 ft (8.53 to 16.15 m). The standard for city deliveries is usually 48 ft (14.63 m). In tight and residential environments the 28 ft (8.53 m) trailer is used the most. The shipments are usually palletized, shrink-wrapped and packaged for a mixedfreight environment. Unlike express or parcel, LTL shippers must provide their own packaging, as carriers do not provide any packaging supplies or assistance. However, circumstances may require crating or other substantial packaging. Air freight
Air freight shipments are very similar to LTL shipments in terms of size and packaging requirements. However, air freight or air cargo shipments typically need to move at much faster speeds than 800 km or 497 mi per day. Air shipments may be booked directly with the
carriers, through brokers or with online marketplace services. While shipments move faster than standard LTL, air shipments don’t always actually move by air. Truckload freight In the United States, shipments larger than about 7,000 kg (15,432 lb) are typically classified as truckload (TL) freight. This is because it is more efficient and economical for a large shipment to have exclusive use of one larger trailer rather than share space on a smaller LTL trailer. The total weight of a loaded truck (tractor and trailer, 5-axle rig) cannot exceed 36,000 kg (79,366 lb) in the United States{fact}. In ordinary circumstances, longhaul equipment will weigh about 15,000 kg (33,069 lb), leaving about 20,000 kg (44,092 lb) of freight capacity. Similarly a load is limited to the space available in the trailer, normally 48 ft (14.63 m) or 53 ft (16.15 m) long, 2.6 m (102.4 in) wide, 2.7 m (8 ft 10.3 in) high and 13 ft 6 in/4.11 m high over all. While express, parcel and LTL shipments are always intermingled with other shipments on a single piece of equipment and are typically reloaded across multiple pieces of equipment during their transport, TL shipments usually travel as the only shipment on a trailer. In fact, TL shipments usually deliver on exactly the same trailer as they are picked up on. Shipping costs
Often, an LTL shipper may realize savings by utilizing a freight broker, online marketplace or other intermediary, instead of contracting directly with a trucking company. Brokers can shop the marketplace and obtain lower rates than most smaller shippers can obtain directly. In the LTL marketplace, intermediaries typically receive 50% to 80% discounts from published rates, where a small shipper may only be offered a 5% to 30% discount by the carrier. Intermediaries are licensed by the DOT and have requirements to provide proof of insurance.
Truckload (TL) carriers usually charge a rate per kilometre or mile. The rate varies depending on the distance, geographic location of the delivery, items being shipped, equipment type required, and service times required. TL shipments usually receive a variety of surcharges very similar to those described for LTL shipments above. In the TL market, there are thousands more small carriers than in the LTL market. Therefore, the use of transportation intermediaries or brokers is extremely common. Another cost-saving method is facilitating pickups or deliveries at the carrier’s terminals. By doing this, shippers avoid any accessorial fees that might normally be charged for liftgate, residential pickup/delivery, inside pickup/delivery, or notifications/appointments. Carriers or intermediaries can provide shippers with the address and phone number for the closest shipping terminal to the origin and/or destination. Shipping experts optimize their service and costs by sampling rates from several carriers, brokers and online marketplaces. When obtaining rates from different providers, shippers may find quite a wide range in the pricing offered. If a shipper uses a broker, freight forwarder or other transportation intermediary, it is common for the shipper to receive a copy of the carrier's Federal Operating Authority. Freight brokers and intermediaries are also required by Federal Law to be licensed by the Federal Highway Administration. Experienced shippers avoid unlicensed brokers and forwarders because if brokers are working outside the law by not having a Federal Operating License, the shipper has no protection in the event of a problem. Also, shippers normally ask for a copy of the broker's insurance certificate and any specific insurance that applies to the shipment.
Security concerns Governments are very concerned with the shipment of cargo, as it may bring security risks to a country. Therefore, many governments have enacted rules and regulations, administered by a customs
agency, to the handling of cargo to minimize risks of terrorism and other crime. Of particular concern is cargo entering through a country's borders. The United States has been one of the leaders in securing cargo. They see cargo as a concern to United States national security.
After the terrorist attacks of September 11th, the security of this agnitude of cargo has become highlighted on the over 6 million cargo containers enter the United States ports each year. The latest US Government response to this threat is the CSI: Container Security Initiative. CSI is a program intended to help increase security for containerized cargo shipped to the United States from around the world.
Vision and Mission of Gati
Be a globally preferred provider of India-centric supply chain services and solutions, and a leader in the Asia Pacific region. Delight customers with quality service by setting new trends through innovation and technology. Be the most preferred organization for all stakeholders.
Be a responsible corporate citizen with unwavering commitment to environmental protection and conservation They are based on a desire to achieve sustainable heights in business and encompass a set of customer sensitive corporate values on attitude, behaviour, action and delivery. Gati is the leader in India in express distribution and supply chain solutions in India with a reach unmatched in the country Providing total end to end logistics solutions for businesses across varied verticals Committed to deliver innovation and service excellence Collaborates with customers to make their businesses
high performance driven Ability to mobilize the right people, skills and technologies to deliver results as desired by the customers Gati started operations in 1989 as a door-to-door calgo company.
Overview of Logistics Market
The size of the Indian logistics market was estimated at US$3.5 trillion in 2005.41India’s growing domestic market and external trade, particularly in textiles, automotive, auto ancillary, and engineering goods have contributed to a massive boost in the logistics industry. India’s container traffic grew faster than the global container traffic during the past 6-7 years. India’s containerization has over 70% of total exported cargo and around 40% imported cargo. The Indian government is making great efforts to improve trade by privatizing ports, increasing the number of gateway ports, investing in highway projects, streamlining customs and excise procedures, implementing EDI systems and improving the rail network. Containerization at major ports of India contributed about 11% of total cargo handled at those ports in 2000-01; it increased to 16% in 2005-06 and is estimated to further increase to 22.7% by 2010-11.42 Although there has been impressive growth in container traffic of over 15% per annum over the past five years, this is far less than international trends. The turnover time at ports came down from 3.7 days in 2002– 03 to 3.5 days in 2005–06, but increased marginally to 3.6 days in 2006-2007.43 The pre-berthing waiting time at major ports on port account, however, increased from 8.77 hours in 2005-06 to 10.05 hours in 2006- 07. The logistics cost as a percentage of the gross domestic product (GDP) stood at 13% in India compared to less than 10% of GDP in almost all of Western Europe and North America. According to industry analysts India spends US$30 billion more than it should on logistics due to inefficiencies in the system, such as high turnaround time at ports, lower average trucking speeds and the high cost
of administrative delays.44 India’s indirect tax regime discouraged large centralized warehouses and led over time to fragmentation in the warehousing sector.45 The transport sector’s contribution to India’s GDP was estimated to be around 6.6% in 2005-06, and road transport has a dominant role in this contribution with a share of 4.7% in India’s GDP.46 Some studies state that the Indian logistics industry is at an inflection point and predict that it will reach a market size of over $125 billion in year 2010. 47
Road
India has one of the largest road networks in the world, aggregating to about 3.34 million kilometers at present.48 The road network comprises 66,754 km of National Highways, 1,28,000 km of State Highways, 4,70,000 km of Major District Roads and about 26,50,000 km of Other District and Rural Roads. Out of the total length of National Highways, about 32 per cent is single lane/ intermediate lane, about 55 per cent is standard 2-lane and the balance 13 per cent is 4-lane width or more. Roads are the most popular mode of transportation in India, accounting for about 85 per cent of passenger traffic and 70 per cent of freight traffic. The road freight industry in India is estimated to be worth about INR 1.42 trillion and is growing at a rate about 6-8 per cent per year. The Ministry of Road Transport & Highways (MRTH) formulates policies on road transport and oversees the development and maintenance of national highways.
The Department of Road Transport & Highways, an apex organization under the Central Government, is entrusted with the task of formulating and administering, in consultation with other Central Ministries/Departments, State Governments and individuals, the policies for road transport. It is also responsible for road safety in the country. The state governments oversee roads in their respective
states, and issues related to rural roads such as policy development and monitoring are under the jurisdiction of the Ministry of Rural Development. The National Highways Act, 1956 was amended in 1995 to encourage private sector participation in the development, maintenance and operation of national highway projects; the private sector was allowed to invest in national highway projects, levy, collect and retain fees from user charges, and could regulate traffic. The industry has traditionally been extremely fragmented; transporters with fleets smaller than five trucks account for over twothirds of the total trucks owned and operated in India and make up 80 per cent of revenues. The national highways and state highways account for less than 6 per cent of the total roads in India, but carry about 80 per cent of total traffic. There are a number of trends indicating that road traffic has expanded faster than capacity. • The estimated average daily traffic volume on the national highway (2-lane) network is 39,000 passenger car units (PCUs) of motorized and nonmotorized traffic as against a capacity of 15,000 PCUs. • Commercial vehicles in India cover 250-300 km at an average speed of 30 km in a single day as against 600 km (average speed of 60-70 km) in the developed countries. However, the government has taken several initiatives under the National Highway Development Project (NHDP) to develop highways in India. As of November 30,2007, 7,962 km of National Highways under the NHDP project have been completed,the bulk of which (5,629 km) lies on the Golden Quadrilateral (GQ). About 7,744 km of National Highways are under construction. Nearly 96 per cent of the work on the GQ was completed by November 2007 and the North-South and East-West corridors are expected to be completed by December 2009.
Rail India has the world’s second largest rail network spread over 81,500 km and covering around 7000 stations. The government of India owns and manages Indian Railways via the Ministry of Railways rather than a private company. Railways are split into 16 zones and the Railway Board looks after the policy and operations of the Indian Railways. In addition, there are production units and subsidiary organizations such as Indian Railway Construction (IRCON), Rail India Technical and Economic Services (RITES), Container Corporation of India (CONCOR), and Center for Railway Information System (CRIS) each of which undertakes specialized jobs. Rail freight traffic revenues stood at Rs. 350 billion in 2006. During April-November 2007, the total revenue-earning freight traffic grew at 8.2 per cent compared to 9.19 per cent during the corresponding period of the previous year. Most freight traffic is carried on electric traction. However, only 28 per cent of the Indian rail network is electrified in contrast to 100 per cent electrification in most developed economies.52 Roads have dominated railways both in terms of passenger traffic and the amount of freight carried The Indian Railways have been taking proactive initiatives in the area of tariff and fare fixation, and commercial practices. The freight structure has been rationalized, reducing the number of classes of commodities for charging purposes from 59 to 32. The rationalization of the fare and freight structure continued during 2007-08. Commodities are placed into different classes for the purpose of fixing tariffs. Freight movements are computerized, and there are new zones and divisions to ensure customer-friendly operations.53 Some of the other proposals to transform Indian railways include
introduction of higher axle load, double stack containers and modernization of track, bridge, and telecommunications. The freight-carrying capacity of the railways is to be increased in the coming years by the construction of Dedicated Freight Corridors (DFCs). The railways has proposed a 2,700-kilometer-long railway line project at an investment of more than Rs. 28,000 crore which consists of a 1,232-km-long Eastern Corridor (from Ludhiana toSonnagar) in Phase I and a 1,469-km-long Western Corridor from Jawaharlal Nehru Port area (Mumbai to Dadri/ Tughlakabad) in Phase II. The development of Logistics Parks on the DFC has also been proposed.54 A special-purpose vehicle (SPV) called Dedicated Freight Corridor Corporation of India Limited (DFCCIL) has been formed to implement the project.
Sea/Maritime Freight The dominance of India’s maritime transport is often attributed to a strategic location, a long coastline of 7,516 km and an established port infrastructure, comprising major ports and minor ports.55 In 2006, the Indian shipping fleet was ranked 20th in terms of its fleet size in gross tonnage (gt) by flag of registration, constituting 1.16 per cent of the world fleet size. In 2007-08, up to October 2007, the cargo handled by major ports registered a growth of 13.9 per cent against 9.5 per cent in the corresponding seven months of 2006-07. JNPT, India’s biggest container port, handled 3298 TEUs in 2006-2007 and 2667 TEUs in 2005-06. The annual aggregate cargo handling capacity of major ports increased from 456.20 MT per annum (MTPA) in 2005-06 to 504.75 MTPA in 2006-07 and the average output per ship berth-day improved from 9,267 tonnes in 2005-06 to 9,745 tonnes in 2006-07. However, the average turnaround time increased marginally from 3.5 days to 3.6 days in 2006-07. The average turnaround time in major
ports of India varies considerably across major ports, from 1.67 days in JNPT to 5.46 in Kandla.57 The average turnaround time for major ports in 2006-2007 and 2005-06 is summarized in Table 2. Average Turnaround Time at Major Ports of India Port 2006-07 2005-06 Kolkata 3.89 4.12 Haldia 3.97 4.00 Paradip 3.54 3.56 Vizhakapatnam 3.65 3.80 Ennore 1.89 2.23 Chennai 3.40 3.30 Tuticorin 3.67 2.83 Cochin 2.19 2.13 New Mangalore 3.14 3.00 Marmagao 4.46 4.08 Mumbai 4.63 4.09 Jawaharlal Nehru Port Trust (JNPT) 1.67 1.96 Kandla 5.46 4.39 All Ports 3.62 3.50 Source: Indian Ports Authority, Major Ports Profile, (2006-07). Note: Figures are in number of days.
The Ministry of Shipping oversees and formulates policies for the development of the shipping and port sectors. The 12 major ports are statutory bodies (trusts) Administered by the Government of India under the Indian Ports Act, 1908 and the Major Port Trust Act, 1963. The Indian Ports Act (1908) lays down rules regarding safety of shipping and conservation of ports for the entire port sector and regulates matters pertaining to the administration of port duties, pilotage and other charges. The Major Port Trust Act (1963) lays down the institutional framework for the major ports in India. The working conditions of port labor are
governed by the Dock Workers (Regulation and Employment) Act of 1948, which stipulates the terms and conditions of port labor employment, service rules standards and other welfare issues in the interest of port and dockworkers. The Act is very protective of workers’ rights and offers them complete job security. The Indian government has made amendments to the Merchant Shipping Act (1958) to encourage the growth and modernization of the industry. Some of these changes include simplification of regulatory procedures for raising resources from commercial markets, retention of sales proceeds from ships abroad, automatic approval for foreign direct investment up to 100 per cent FDI, repair of ships in any foreign shipyard without seeking prior approval of the government, and delicensing of many liner routes.58 The government adopted the tonnage tax system in April 2004, and under the new regime ship-owners can opt for the tonnage tax whereby income tax is levied on the basis of income of the Net Tonnage (NT) according to a fixed scale. This is estimated to have reduced the incidence of tax by around 3 per cent and led to an immediate increase in Indian-owned tonnage.
Privatization of port facilities and services has gathered momentum in India. Depending on the nature of the facility/ service, private operators can enter into a service contract, a management contract, a concession agreement or a divestiture to operate port services. The changes and liberalization of shipping services and ports offer new opportunities for logistics companies. Logistic companies in the marine based segments are expanding their fleets and entering into new ventures. For instance, Varun Shipping is procuring offshore vehicles, while NYK line has tied up with Tata Steel for its bulk cargo requirements. A number of shipping and port MNCs are focusing on Indian ports and there is huge interest in developing third and fourth container terminals of JNPT. JNPT port has signed a license agreement with Gateway Terminals India, a consortium led by the Danish major, Maersk Sealand, to set up thethird container terminal at the port. Recently, there were reports that the port of
Rotterdam and Sohar Industrial Port have formed a consortium with Sea King Infrastructure Limited (SKIL) to develop Positra port in Gujarat. Rotterdam port would provide its expertise in developing, managing and operating the terminal, while Sohar will use its world-wide commercial linkages to help establish linkages with international maritime networks. In spite of these positive developments, Indian ports have a long way to go to reach international standards. Despite having adequate capacity and modern handling facilities, the average turnaround time of 3.6 days, compared with 10 hours in Hong Kong, undermines the competitiveness of Indian ports. A report by the Ministry of Shipping (2007) analyzed the efficiency of the major ports in the country and compared the performance of Indian ports to the ports of Rotterdam and Singapore. It was observed that the dwell time for containers at major Indian port container terminals is 1.88 days for import and 3.78 days for export, whereas in Singapore it is 0.6 days for import (trans-shipment) and 0.6 days for export (trans-shipment). A detailed time-study revealed that although the total time taken by the port authority is 3.5 to 5.5 hrs for import and 3.3 to 5.3 hrs for export, the rest of the time the container dwells in the port is on account of other stakeholders like shipping agents, customs, clearing agents, transporters, for payment of port charges and arrangement of transport. There are significant differences between Indian and international ports, especially regarding connection to the hinterland and level of computerization. In the port of Rotterdam, enterprise resource planning software was implemented years ago, while it is still being envisaged for implementation in India. EDI implementation is also partial in Indian ports, with many human interfaces and manual exchange of documents. The other major differences between Indian ports and the Rotterdam port are summarized in below.
S. No.
Indian Ports
Rotterdam Port
1. Evacuation/ Aggregation of cargo Cargo is predominantly through rail and road only.
Bulk cargo and container movement through barges accounts for 50-60% of transportation because of excellent inland water-networking. Intermodal connectivity by road/ rail is seamless.
2. Level of Mechanization The extent of mechanization is low in Indian ports. in
The level of mechanization is very with the latest technologies applied all spheres.
3. Location of port-based industries Most manufacturing firms are located away from the ports.
Most manufacturing units are located within the ports so evacuation is very fast.
4. Availability of storage space Land is very scarce in ports. So evacuation has to take place.
As so much land is available at Rotterdam port, the longer the cargo lies within the terminal, the higher the revenue to the terminal operator.
5. Availability of Resources There are dedicated terminals with fewer berths.
There is no concept of pre-berthing detentions as berths are waiting for the ships and they have longer quay lengths.
Warehousing Warehousing is an important segment of logistics and consists of warehousing related to distribution (trans-shipment warehouse), and terminals used for bulking/debulking and temporary storage. The size of the warehousing segment in India was estimated to be Rs. 1.2 trillion in 2006.63 The warehousing sector is highly fragmented due to India’s indirect tax structure. Since taxes paid on cross-border sales
are higher than local tax charges, most companies prefer to set up small warehouses across different states rather than large centralized set-ups. This leads to small-scale, fragmented warehouses, with corresponding inefficiencies. The enactment of the Warehousing (Development and Regulation) Act in December 2007 was an important initiative to regulate the warehousing business. The Act seeks to register warehouses issuing negotiable warehouse receipts and also allows registration of accreditation agencies for warehouses. The Central and State Governments presently dominate the warehousing industry, both as clients and as service providers. The Central Warehousing Corporation (CWC) is the largest provider of warehousing services in India and operates 517 warehouses across the country with a storage capacity of 10.3 million tonnes.64 MCXowned National Bulk Handling Corporation is becoming a serious player in the industry followed by NCDEX-managed National Collateral Management Services. Most third-party logistics providers including EU companies such as Maersk Logistics India also provide storage and warehousing facilities. However, private sector participation has been limited to date due to scarcity of land, lack of prescribed standards and uniform practices for quality verification, lack of a uniform accreditation body in the warehousing sector, etc.
Third-Party Logistics Providers (3PL) in India
Third-party logistics (3PL)/outsourced logistics is the outsourcing of a company's logistics operations to a specialized firm that provides multiple logistics instead of having a business unit in-house to oversee its supply chain and transportation of goods. Third-party logistics is still at a nascent stage in India. According to Data monitor, outsourced logistics represents around one-quarter of the entire $90 billion Indian logistics market and will grow at a compound annual
growth rate (CAGR) of over 16 per cent from 2007-10. The 3PL industry in India was pioneered by global logistics majors – Indian subsidiaries of multinational companies in the automobile, electronics and FMCG sectors were the main users of specialist logistics service providers in the past. Frost & Sullivan identified the auto industry as the largest end-user industry for 3PL services in India.65 Expansion of manufacturing facilities by multinational automobile makers, like Suzuki, Honda, and Ford indicates huge potential for 3PL providers. The number of participants in the 3PL industry grew to more than 400 in 2005.66 The Indian 3PL industry can be divided into three distinct tiers – national major 3PLcompanies with nationwide presence, regional 3PL companies with strong presence in one or two regions, and small remote 3PL companies. There are several 3PL companies from the EU with a nationwide presence operating in India, including Maersk Logistics, Geodis, DSV Frans Maas and Schenker logistics. 3PL providers in India face several challenges due to the huge diversity in geographic conditions, consumer habits, and infrastructure conditions across the country. Logistics operations in each state require a state-specific suitable model that facilitates effective storage and transportation of goods mostly sold in that state, making it difficult to adopt a uniform logistics model. Infrastructure limitations in India, which limit the scope of logistics services as a package, are another concern for 3PL service providers. Barriers in India
Road The major barrier to development of the road industry in India is the fragmented industry structure and dominance of a large number of small unorganized operators.
The large number of operators has been the result of lower capital requirements, ease of obtaining truck driving licenses and permits, and little expertise required in terms of educational skills. The small operators are involved mainly in physical haulage and depend on brokers and other fleet operators who, in turn, depend on booking agents to secure business; they are not in a position to perform the functions of aggregating, handling, and marketing. The middlemen/ intermediaries, which include the booking agents and the brokers, are the dominant players in the market and often fix freight rates. Such practices result in higher prices for the end user, lower profitability for truck operators, lower capacity utilization and poor quality of services There are a number of barriers to inter-state movement of road freight in India. Freight vehicles are detained to check essential documents such as the registration book, driving license, permits (RTO checking) and also to check payment of commercial taxes such as sales tax, octroi and other local levies. In addition, detentions take place for booking traffic rule violations (police checking) and also at tate borders (Border Post checking). Such barriers result in huge delays and transactions costs, and reduce the international competitiveness of logistics firms.
Rail
The major problem in rail is the lack of a dedicated freight corridor. Indian Railways (IR) has a large number of social obligations such as provision of widespread access, carriage of essential bulk goods and low-cost passenger service. It fulfils its social service obligation by cross-subsidizing from freight to passengers which results in inflated freight tariffs.91 The railway sector further suffers from severe financial constraints due to the politically-determined fare structure as well as wasteful operating practices. Resources are typically spread thin to respond to political demands for new passenger trains at the cost of investments in rail freight carriers.
Inadequate rail corridors lead to massive delays, even for transportation between major Indian cities; for instance, the logistics survey points out that cargo takes 5-6 days to reach Delhi from Mumbai by rail. The second issue raised by logistic companies is of connectivity between railways and ports. The absence of proper connections leads to greater delays when rail transport is used; for instance, companies report that in Mumbai, Panvel has only a single track line that is directly connected to JNPT port. Overall, however, logistics companies report a lower incidence of problems with rail compared to road. The issues of bribes and multiple taxes seem to make road transport a bigger source of additional delay and costs for logistics operators compared to rail.
Sea/Maritime The primary survey reveals that the major problem faced by logistic companies is congestion at ports. Most companies feel that existing ports are inadequately equipped to handle increasing sea-traffic. Sea cargo not only faces long clearance times, but also problems such as non-availability of containers, erratic window/idle time for vessels, and frequent breakdown of cargo handling equipment. On the shipping side, companies report delays due to lack of main lines in India; containers from an Indian port have to be trans-shipped and go through a hub port which considerably increases the time in transit. The other important issue raised by companies relates to connectivity of ports; ports are poorly connected to the hinterland and there are no assured timings for connections with container trains. Some companies mention problems with manpower at the ports. Some of these problems include constant labor union issues, lack of skilled labor for pilotage and operation of equipment (in spite of the large labor force), and absence of round-the-clock workers.
Warehousing
The survey revealed inventory management is a problem in warehousing. Warehouses in India are extremely fragmented and on a small scale. Since warehousing facilities are small, they are typically managed by local clearing and forwarding (C&F) agents who have poor knowledge of warehousing technology. Companies also report high risk of damage to cargo due to poor warehousing practices. Finally, 3PL providers complained of difficulty in acquiring land for warehouses. The right place for warehouses are areas in proximity to air/sea ports; however, such areas are not easily available to private companies, so companies settle for warehouses that are one-tenth of the planned capacity due to land problems. 3PL logistics providers are particularly affected since often they cannot offer warehousing services and it impedes their ability to provide complete logistics solutions to clients.
HR in Gati
Gati believed in long term employee relationship. Organizational commitment win-win situation, multiskilling of employees, and long term employment were the key ingredients of human relations function. Attitude was given more importance in employee recruitment than qualification and expertise. On every possible occasion, Agarwal made it explicit that Gati was a caring Organization. Whenever possible, food was cooked and served to employee in all Gati offices. while the informal set and atmosphere worked well for quite some time, major reforms will not initiated between 2000 and 2003 to enhance competitiveness of Gati in the changing business environment. Agarwal himseif personally met the family members of an employee in case he/she lost life in a (major) road accident. This was systematically followed up. Today (2005), where Agarwal cannot
visit the family of the victim, a senior employee of the company is deputed. Most of the Gati employees (until 1994) were inherited from TCI. There was a need to enhance their competency level. Management graduates and engineers were recruited from the campuses and placed in executive or managerial cadre. To keep a check on the number of employees, a performance-based separation scheme was implemented. The separated employees were given option opportunity ,and financial support to work for Gati as entrepreneurs. The gender mix in Gati was skewed towards males.Very few women worked for Gati. To bring an element of improvement in social behaviour within Gati (in terms of spoken language marmers, etc.) w omen employees were inducted as management and graduate hainees (this initiative was based on the hope and assumption that, in the presence of women, male employees would tend to be more gentlel). The entrylevel qualification was increased from school pass (highers econdary qualified) to graduation. Recruitment as need based. Advertisements, using manpower consultants, and visiting campuses were the modes of recruitment. Understanding of the service industry, ability to sell a product, innovativeness, business knor4edge and exposure to functional areas of business, ofter skills (like communication and sensitivity), and ability to work in a team were the range of skills sought in a fresh recruit. . Every new entrant went through a seven-day induction course, at a place other than his/her place of posting. Standard training modules on marketing, customer orientation, and service quality were routinely offered. Several executives were nominated for management courses in reputed Indian educational institutions. The performance appraisal system was changed from the managing director reviewing the performance with every regional manager to a broad based open appraisal system. Two broad based review committees did the appraisal. A central review committee and a regional review committee reviewed the
performance of every manager along with the managing director in an open environment. Welfare measures included financial support on a need basis. AIl employees and family including parents were covered through insurance policies. For staff, all statutory requirements were provided. Remuneration and perks for senior executives are comparable with the best in the industry.
