I.

LOGISTICS

INTRODUCTION
Logistics is generally the detailed organization and implementation of a complex operation.
In a general business sense, logistics is the management of the flow of things between the
point of origin and the point of consumption in order to meet requirements of customers or
corporations. The resources managed in logistics can include physical items such as food,
materials, animals, equipment, and liquids; as well as abstract items, such as time and
information. The logistics of physical items usually involves the integration of information
flow, material handling, production, packaging, inventory, transportation, warehousing, and
often security.
In military science, logistics is concerned with maintaining army supply lines while
disrupting those of the enemy, since an armed force without resources and transportation is
defenseless. Military logistics was already practiced in the ancient world and as modern
military have a significant need for logistics solutions, advanced implementations have been
developed. In military logistics, logistics officers manage how and when to move resources to
the places they are needed.
Logistics management is the part of supply chain management that plans, implements, and
controls the efficient, effective forward, and reverse flow and storage of goods, services, and
related information between the point of origin and the point of consumption in order to meet
customer's requirements. The complexity of logistics can be modeled, analyzed, visualized,
and optimized by dedicated simulation software. The minimization of the use of resources is
a common motivation in all logistics fields. A professional working in the field of logistics
management is called a logistician.

ORIGINS AND DEFINITION

The prevalent view is that the term logistics comes from the late 19th century: from French
logistique (loger means to lodge) and was first used by Baron de Jomini. Others attribute a
Greek origin to the word: , meaning reason or speech; , meaning accountant
or responsible for counting.
The Oxford English Dictionary defines logistics as "the branch of military science relating to
procuring, maintaining and transporting material, personnel and facilities". However, the
New Oxford American Dictionary defines logistics as "the detailed coordination of a complex
operation involving many people, facilities, or supplies," and the Oxford Dictionary on-line
defines it as "the detailed organization and implementation of a complex operation". As such,
logistics is commonly seen as a branch of engineering that creates "people systems" rather
than "machine systems."
According to the Council of Supply Chain Management Professionals (previously the
Council of Logistics Management) logistics is the process of planning, implementing and
controlling procedures for the efficient and effective transportation and storage of goods
including services and related information from the point of origin to the point of
consumption for the purpose of conforming to customer requirements and includes inbound,
outbound, internal and external movements.
Academics and practitioners traditionally refer to the terms operations or production
management when referring to physical transformations taking place in a single business
location (factory, restaurant or even bank clerking) and reserve the term logistics for activities
related to distribution, that is, moving products on the territory. Managing a distribution
center is seen, therefore, as pertaining to the realm of logistics since, while in theory the
products made by a factory are ready for consumption they still need to be moved along the
distribution network according to some logic, and the distribution center aggregates and
processes orders coming from different areas of the territory. That being said, from a
modeling perspective, there are similarities between operations management and logistics,
and companies sometimes use hybrid professionals, with for ex. "Director of Operations" or
"Logistics Officer" working on similar problems. Furthermore, the term supply chain
management originally refers to, among other issues, having an integrated vision in of both
production and logistics from point of origin to point of production. All these terms may
suffer from semantic change as a side effect of advertising.

LOGISTICS ACTIVITIES AND FIELDS

A basic distinction in the nature of logistics activities is between inbound and outbound
logistics.
Inbound logistics is one of the primary processes of logistics, concentrating on
purchasing and arranging the inbound movement of materials, parts, and/or finished
inventory from suppliers to manufacturing or assembly plants, warehouses, or retail
stores.
Outbound logistics is the process related to the storage and movement of the final
product and the related information flows from the end of the production line to the
end user.
Given the services performed by logisticians, the main fields of logistics can be broken down
as follows:

Procurement logistics

Distribution logistics

After-sales logistics

Disposal logistics

Reverse logistics

Green logistics

Global logistics

Domestics logistics

Concierge Service

RAM logistics

Asset Control Logistics

POS Material Logistics

Emergency Logistics

Production Logistics

Construction Logistics

o Procurement logistics consists of activities such as market research, requirements

planning, make-or-buy decisions, supplier management, ordering, and order
controlling. The targets in procurement logistics might be contradictory: maximizing
efficiency by concentrating on core competences, outsourcing while maintaining the
autonomy of the company, or minimizing procurement costs while maximizing
security within the supply process.
o Distribution logistics has, as main tasks, the delivery of the finished products to the
customer. It consists of order processing, warehousing, and transportation.
Distribution logistics is necessary because the time, place, and quantity of production
differs with the time, place, and quantity of consumption.
o Disposal logistics has as its main function to reduce logistics cost(s) and enhance
service(s) related to the disposal of waste produced during the operation of a business.
o Reverse logistics denotes all those operations related to the reuse of products and
materials. The reverse logistics process includes the management and the sale of
surpluses, as well as products being returned to vendors from buyers. Reverse
logistics stands for all operations related to the reuse of products and materials. It is
"the process of planning, implementing, and controlling the efficient, cost effective
flow of raw materials, in-process inventory, finished goods and related information
from the point of consumption to the point of origin for the purpose of recapturing
value or proper disposal. More precisely, reverse logistics is the process of moving
goods from their typical final destination for the purpose of capturing value, or proper
disposal. The opposite of reverse logistics is forward logistics."
o Green Logistics describes all attempts to measure and minimize the ecological impact
of logistics activities. This includes all activities of the forward and reverse flows.
This can be achieved through intermodal freight transport, path optimization, vehicle
saturation and city logistics.
o RAM Logistics combines both business logistics and military logistics since it is
concerned with highly complicated technological systems for which Reliability,
Availability and Maintainability are essential, ex: weapon systems and military
supercomputers.
o Asset Control Logistics companies in the retail channels, both organized retailers and
suppliers, often deploy assets required for the display, preservation, promotion of their
products. Some examples are refrigerators, stands, display monitors, seasonal
equipment, poster stands & frames.
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o Emergency logistics (or Humanitarian Logistics) is a term used by the logistics,

supply chain, and manufacturing industries to denote specific time-critical modes of
transport used to move goods or objects rapidly in the event of an emergency. The
reason for enlisting emergency logistics services could be a production delay or
anticipated production delay, or an urgent need for specialized equipment to prevent
events such as aircraft being grounded (also known as "aircraft on ground"AOG),
ships being delayed, or telecommunications failure. Humanitarian logistics involves
governments, the military, aid agencies, donors, non-governmental organizations and
emergency logistics services are typically sourced from a specialist provider.

(A forklift truck loads a pallet of humanitarian aid to Pakistan on board a C-17 aircraft,
following devastating floods in the country in 2010.)
o The term Production Logistics describes logistic processes within a value adding
system (ex: factory or a mine). Production logistics aims to ensure that each machine
and workstation receives the right product in the right quantity and quality at the right
time. The concern is with production, testing, transportation, storage and supply.
Production logistics can operate in existing as well as new plants: since manufacturing
in an existing plant is a constantly changing process, machines are exchanged and
new ones added, which gives the opportunity to improve the production logistics
system accordingly. Production logistics provides the means to achieve customer
response and capital efficiency. Production logistics becomes more important with
decreasing batch sizes. In many industries (e.g. mobile phones), the short-term goal is
a batch size of one, allowing even a single customer's demand to be fulfilled
efficiently. Track and tracing, which is an essential part of production logistics due to
product safety and reliability issues, is also gaining importance, especially in the
automotive and medical industries.

o Construction Logistics is known to mankind since ancient times. As the various

human civilizations tried to build the best possible works of construction for living
and protection. Now the construction logistics emerged as vital part of construction.
In the past few years construction logistics has emerged as a different field of
knowledge and study with in the subject of supply chain management and logistics.

BUSINESS LOGISTICS

(A forklift stacking a logistics provider's warehouse of goods on pallets.)

One definition of business logistics speaks of "having the right item in the right quantity at
the right time at the right place for the right price in the right condition to the right customer".
Business logistics incorporates all industry sectors and aims to manage the fruition of project
life cycles, supply chains, and resultant efficiencies.
The term "business logistics" has evolved since the 1960s due to the increasing complexity of
supplying businesses with materials and shipping out products in an increasingly globalized
supply chain, leading to a call for professionals called "supply chain logisticians".
In business, logistics may have either an internal focus (inbound logistics) or an external
focus (outbound logistics), covering the flow and storage of materials from point of origin to
point of consumption. The main functions of a qualified logistician include inventory
management, purchasing, transportation, warehousing, consultation, and the organizing and
planning of these activities. Logisticians combine a professional knowledge of each of these
functions to coordinate resources in an organization.
There are two fundamentally different forms of logistics: one optimizes a steady flow of
material through a network of transport links and storage nodes, while the other coordinates a
sequence of resources to carry out some project (e.g., restructuring a warehouse).

Nodes of a distribution network

The nodes of a distribution network include:

Factories where products are manufactured or assembled

A depot or deposit is a standard type of warehouse thought for storing merchandise

(high level of inventory).

Distribution centres are for order processing and order fulfillment(lower level of
inventory) and also for receiving returning items from clients.

Transit points are built for cross docking activities, which consist in reassembling
cargo units based on deliveries scheduled (only moving merchandise).

Traditional retail stores of the Mom and Pop variety, modern supermarkets,
hypermarkets, discount stores or also voluntary chains, consumer cooperative, groups
of consumer with collective buying power. Note that subsidiaries will be mostly
owned by another company and franchisers, although using other company brands,
actually own the point of sale.

There may be some intermediaries operating for representative matters between nodes such
as sales agents or brokers.

Logistic families and metrics

A logistic family is a set of products which share a common characteristic: weight and
volumetric characteristics, physical storing needs (temperature, radiation,...), handling needs,
order frequency, package size, etc. The following metrics may be used by the company to
organize its products in different families:

Physical metrics used to evaluate inventory systems include stocking capacity,

selectivity, superficial utilization, volumetric utilization, transport capacity, transport
capacity utilization.

Monetary metrics used include space holding costs (building, shelving and services)
and handling costs (people, handling machinery, energy and maintenance).

Other metrics may present themselves in both physical or monetary form, such as the
standard Inventory turnover.

Handling and order processing

(Unit loads for transportation of luggage at the airport, in this case the unit load has protective
function.)

Unit loads are combinations of individual items which are moved by handling systems,
usually employing a pallet of normed dimensions.
Handling systems include: trans-pallet handlers, counterweight handler, retractable mast
handler, bilateral handlers, trilateral handlers, AGV and stacker handlers. Storage systems
include: pile stocking, cell racks (either static or movable), cantilever racks and gravity racks.
Order processing is a sequential process involving: processing withdrawal list, picking
(selective removal of items from loading units), sorting (assembling items based on
destination), package formation (weighting, labeling and packing), order consolidation
(gathering packages into loading units for transportation, control and bill of lading).
Picking can be both manual or automated. Manual picking can be both man to goods, i.e.
operator using a cart or conveyor belt, or goods to man, i.e. the operator benefiting from the
presence of a mini-load ASRS, vertical or horizontal carousel or from an Automatic Vertical
Storage System (AVSS). Automatic picking is done either with dispensers or depalletizing
robots.
Sorting can be done manually through carts or conveyor belts, or automatically through
sorters.

Transportation
Cargo, i.e. merchandise being transported, can be moved through a variety of transportation
means and is organized in different shipment categories. Unit loads are usually assembled
into higher standardized units such as: ISO containers,swap bodies or semi-trailers.
Especially for very long distances, product transportation will likely benefit from using
different transportation means: multimodal transport, intermodal transport (no handling) and
combined transport (minimal road transport). When moving cargo, typical constraints are
maximum weight and volume.
Operators involved in transportation include: all train, road vehicles, boats, airplanes
companies, couriers, freight forwarders and multi-modal transport operators.
Merchandise being transported internationally is usually subject to the Incoterms standards
issued by the International Chamber of Commerce.

Configuration and management

(Push-Back rack for motorcycles, a LIFO rack system for storage.)

Similarly to production systems, logistic systems need to be properly configured and
managed. Actually a number of methodologies have been directly borrowed from operations
management such as using Economic Order Quantity models for managing inventory in the
nodes of the network. Distribution resource planning (DRP) is similar to MRP, except that it
doesn't concern activities inside the nodes of the network but planning distribution when
moving goods through the links of the network.
Traditionally in logistics configuration may be at the level of the warehouse (node) or at
level of the distribution system (network).
Regarding a single warehouse, besides the issue of designing and building the warehouse,
configuration means solving a number of interrelated technical-economic problems:
dimensioning rack cells, choosing a palletizing method (manual or through robots), rack
dimensioning and design, number of racks, number and typology of retrieval systems (e.g.
stacker cranes). Some important constraints have to be satisfied: fork and load beams
resistance to bending and proper placement of sprinklers. Although picking is more of a
tactical planning decision than a configuration problem, it is important to take it into account
when deciding the racks layout inside the warehouse and buying tools such as handlers and
motorized carts since once those decisions are taken they will work as constraints when
managing the warehouse, same reasoning for sorting when designing the conveyor system
and/or installing automatic dispensers.
Configuration at the level of the distribution system concerns primarily the problem of
location of the nodes in a geographic space and distribution of capacity among the nodes. The
first may be referred to as facility location (with the special case of site selection) while the
latter to as capacity allocation. The problem of outsourcing typically arises at this level: the
nodes of a supply chain are very rarely owned by a single enterprise. Distribution networks
can be characterized by numbers of levels, namely the number of intermediary nodes between
supplier and consumer:

Direct store delivery, i.e. zero levels

One level network: central warehouse

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Two level network: central and peripheral warehouses

This distinction is more useful for modeling purposes, but it relates also to a tactical decision
regarding safety stocks: considering a two level network, if safety inventory is kept only in
peripheral warehouses then it is called a dependent system (from suppliers), if safety
inventory is distributed among central and peripheral warehouses it is called an independent
system (from suppliers). Transportation from producer to the second level is called primary
transportation, from the second level to consumer is called secondary transportation.
Although configuring a distribution network from zero is possible, logisticians usually have
to deal with restructuring existing networks due to presence of an array of factors: changing
demand, product or process innovation, opportunities for outsourcing, change of government
policy toward trade barriers, innovation in transportation means (both vehicles or
thoroughfares), introduction of regulations (notably those regarding pollution) and
availability of ICT supporting systems (e.g. ERP or e-commerce).
Once a logistic system is configured, management, meaning tactical decisions, takes place,
once again, at the level of the warehouse and of the distribution network. Decisions have to
be made under a set of constraints: internal, such as using the available infrastructure, or
external, such as complying with given product shelf lives and expiration dates.
At the warehouse level, the logistician must decide how to distribute merchandise over the
racks. Three basic situations are traditionally considered: shared storage, dedicated storage
(rack space reserved for specific merchandise) and class based storage (class meaning
merchandise organized in different areas according to their access index).

(Airline logistic network. Note how Denver works as hub in the network.)
Picking efficiency varies greatly depending on the situation. For man to goods situation, a
distinction is carried out between high level picking (vertical component significant) and low
level picking (vertical component insignificant). A number of tactical decisions regarding
picking must be made:

Routing path: standard alternatives include transversal routing, return routing,

midpoint routing and largest gap return routing

Replenishment method: standard alternatives include equal space supply for each
product class and equal time supply for each product class.
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Picking logic: order picking vs batch picking.

At the level of the distribution network, tactical decisions involve mainly inventory control
and delivery path optimization. Note that the logistician may be required to manage the
reverse flow along with the forward flow.

Warehouse management and control

Although there is some overlap in functionality, warehouse management systems (WMS) can
differ significantly from warehouse control systems (WCS). Simply put, a WMS plans a
weekly activity forecast based on such factors as statistics and trends, whereas a WCS acts
like a floor supervisor, working in real time to get the job done by the most effective means.
For instance, a WMS can tell the system that it is going to need five of stock-keeping unit
(SKU) A and five of SKU B hours in advance, but by the time it acts, other considerations
may have come into play or there could be a logjam on a conveyor. A WCS can prevent that
problem by working in real time and adapting to the situation by making a last-minute
decision based on current activity and operational status. Working synergistically, WMS and
WCS can resolve these issues and maximize efficiency for companies that rely on the
effective operation of their warehouse or distribution center.

Logistics outsourcing
Logistics outsourcing involves a relationship between a company and an LSP (logistic service
provider), which, compared with basic logistics services, has more customized offerings,
encompasses a broad number of service activities, is characterized by a long-term orientation,
and thus has a strategic nature.
Outsourcing does not have to be complete externalization to a LSP, but can also be partial:

A single contract for supplying a specific service on occasion

Creation of a spin-off

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Creation of a joint venture

Third-party logistics (3PL) involves using external organizations to execute logistics

activities that have traditionally been performed within an organization itself. According to
this definition, third-party logistics includes any form of outsourcing of logistics activities
previously performed in house. For example, if a company with its own warehousing
facilities decides to employ external transportation, this would be an example of third-party
logistics. Logistics is an emerging business area in many countries.
The concept of a fourth-party logistics (4PL) provider was first defined by Andersen
Consulting (now Accenture) as an integrator that assembles the resources, planning
capabilities, and technology of its own organization and other organizations to design, build,
and run comprehensive supply chain solutions. Whereas a third-party logistics (3PL) service
provider targets a single function, a 4PL targets management of the entire process. Some have
described a 4PL as a general contractor that manages other 3PLs, truckers, forwarders,
custom house agents, and others, essentially taking responsibility of a complete process for
the customer.

Horizontal alliances between logistics service providers

Horizontal business alliances often occur between logistics service providers, i.e., the
cooperation between two or more logistics companies that are potentially competing. In a
horizontal alliance, these partners can benefit twofold. On one hand, they can "access
tangible resources which are directly exploitable." In this example extending common
transportation networks, their warehouse infrastructure and the ability to provide more
complex service packages can be achieved by combining resources. On the other hand,
partners can "access intangible resources, which are not directly exploitable." This typically
includes know-how and information and, in turn, innovation.

II. LOGISTICS IN E-COMMERCE

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THE EVOLUTION OF E-COMMERCE LOGISTICS

E-Commerce Logistics Models
In developed economies, e-commerce logistics represents the latest big driver of change in
logistics and physical distribution networks, which have evolved substantially over the past
40 years or so. Currently, it remains the case that as e-commerce continues to grow, most
shippers, particularly multi-channel shippers, are still only just beginning to work out what
this will entail for their distribution network infrastructures.
From a distribution property perspective, this evolution has passed through various general
phases and very broadly in the timeline as follows:

In the 1970s, most retail stores were replenished by direct deliveries from suppliers or
wholesalers.

In the 1980s, retailers started to centralize their store deliveries through new
distribution centers which they controlled.

In the 1990s, global sourcing (for non-food products) took off, with many retailers
developing import centers to receive and process mostly containerized imports.

From around 2000, e-commerce began to rapidly expand with pure-play (internet
only) retailers leading the way in establishing e-fulfillment distribution networks

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E-Commerce Logistics in Developed Markets

In developed economies the growth of online retail has been stronger in sectors such as
fashion, electrical and ICT goods, as opposed to food.
In the former, where purchased items are typically distributed via a postal, parcel or freight
network, e-commerce logistics models have led to a wave of new demand for four distinct
types of logistics functions:
1. Mega e-fulfillmentcenters where the merchandise is stocked and picked at item level.
These facilities, which are either operated by the retailer or a logistics service
provider, are typically 500,000 sqft to one million sqft in size, or even larger. They
often operate 24/7.
2. Parcel hubs/sortation centers which sort orders by zip or post code so that they can be
delivered to the relevant parcel delivery center for final delivery to the customers
home or designated collection point.
3. Parcel delivery centers which handle the last mile delivery to the customer
4. Seamlessly integrated technology where shopping carts connect via API, web xml or
some other connection to a transportation management system so shoppers are getting
the exact price quote of shipping of larger items more suited for less than truckload
modes, as these technology products for logistics, such as a TMS, must accomplish
along with the shopping cart for better management:
1. Ability to organize and track shipment no matter what mode
2. Online order status and documentation
3. Online dispatch documentation and invoice, such as a bill of lading and freight
invoice
4. Auto reminder for payments
5. Seamless interface with existing SCM or ERP system
6. Online alerts for critical information via text or mobile
7. Information systems reports on past data analysis, delivery history, etc.
These types of e-commerce logistics systems, based on the above considerations, ensure the
following benefits to shippers, customers, and 3PL service providers:

Improved communication

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Transparency into the supply chain

Improved customer satisfaction

Cost reduction

Improvement in efficiency

On-time delivery

Supply Chains with respect to Amazon

Its been close to 19 years since Jeff Bezos opened his online bookstore from a 400-square
foot garage in Seattle. Today, Amazon is one of the largest companies in America, with
operations across the world and a stock valuation greater than most Fortune 500 companies.
The concept, initially, was simple: to do business exclusively online, offering customers the
convenience of shopping from home and giving the seller little overhead costs.
Since ecommerce was born, everything has changed: the proliferation of the Internet into
daily life; the look and feel of the online space; the speed of internet connections; even who is
getting online and how theyre getting there! Convenience and low prices were the driving
forces for ecommerce in the early days. But today, with ecommerce retailers catering to every
kind of product, service, and shopping experience, the challenge has shifted. Here is a brief
look at how direct-to-consumer order fulfillment has evolved over the years to match those
challenges.

Supply Chains Evolve in an E-Commerce Logistics World

Then: Supply chains handled old-school, brick and mortar retail, where products arrived in
warehouses in bulk, were moved around in pallets and selected by the case, and were shipped
out to store in bulk.
Now: Ecommerce poses the unique challenge of inventory arriving in bulk, but requires much
care from there receiving bulk orders, then inventorying and picking those SKUs as
individual products. Therefore, ecommerce retailers have to find a way to standardize and
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synchronize business processes to have real-time access and insight to inventory movement.
Often, with dozens of suppliers, multiple warehouses, and an extensive number of sales
channels, the chances of a misplaced order are much higher.
However, order fulfillment technologies have helped integrate the front-end and back-end of
online retail. The back-end process is now a collaborative effort thanks to automated software
and real-time fulfillment data. The alignment of important touch-points in the supply chain
has reduced inefficiencies and had helped identify redundant processes. Heck, we even have
robots that will pick inventory for us AND move it around the warehouse!

Freight Shipping Changed in an E-Commerce Logistics World

Then: In the early days of e-commerce, it was about the convenience of ordering a product
from home. No driving to the mall and no waiting in line, just living life and waiting for the
package to be delivered to your doorstep. Shippers still used snail mail and phone calls to
communicate with customers and order delivery times were in the weeks, not days. Free
shipping quickly became a tool that brought in competitors customers, since there werent
many carrier options, no additional costs (such as sales tax) existed, and order delivery times
were slow anyway.
Now: E-commerce merchants collect sales tax, fuel charges are much higher, and the everpopular free shipping is the farthest thing from free to retailers. Other than giants like
Amazon, not many retailers have the resources to operate multiple distribution centers in
strategic locations and instead are turning to third party logistics service providers to reach
their customers.
The evolution of multiple shipping options allowing customers more control over the delivery
process than ever before, expanding from only small package from USPS, UPS, and Fed Ex
to now get larger items via less than truckload modes.
Its no longer about being the fastest rate in the e-commerce delivery race. Instead, it is about
being able to deliver an order at a time frame and price point that customers want.

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IMPORTANCE OF LOGISTICS IN E-COMMERCE

As an ecommerce business owner, you'll have to familiarize yourself with logistics. Back-end
supply chain management is a critical component of any business today, but that's especially
the case in ecommerce. Since you don't have a brick-and-mortar storefront to house
inventory, you have to rely on third parties to help store and ship your products and services.
Logistics is simply the management of the way resources are obtained, stored and shipped to
their end destinations. The planning, execution and control of the movement and placement
of these goods and services must all occur within a given system that's designed to achieve
specific objectives, which may vary by industry.
Taking a more macro view, logistics management entails a few steps:

Locating and identifying potential suppliers and distributors

Determining their accessibility and effectiveness in terms of business production

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Forming relationships and finding the most cost-effective solutions for your business

Larger companies often work with multiple parties to keep pace with demand. However, your
small business doesn't necessarily need to partner with different organizations to manage your
ecommerce website logistics. If your operation is small enough, you can work with local
businesses and organizations to ship and store your products.
Logistical process like for a Business
Logistics on a small-business scale aren't overly complex. Once a customer completes his or
her order on your website, the transaction will trigger any inventory software you have. As a
retailer, most ecommerce platforms will have integrated inventory management software, so a
completed payment will automatically adjust your inventory accordingly.
Once one get the notification an order has been confirmed, it's time to ship the product.
Depending on the size of your operation, the next steps could vary:

Home/office operation: If you're running your website from your home or a separate
office and store inventory there, all you have to do it package the product and send it
to the buyer. This is a great option for newer and small businesses because they save
money on overhead by not having to outsource their warehouse management to a
third party.

Brick-and-mortar retailer: If you own a storefront location and have the room to
store the products you sell online there, the same principle applies as above. Just pack
up the product and send it to the awaiting customer.

Outsourced logistics: If your operation is large enough to outsource your online

operation logistics, you'll likely have to sync your platform with the third party you
partner with. That way, once a customer makes a purchase, the distribution center will
know and they can send the package out quickly. This hands-off approach is well
organized and eases the stress of shipping so you can focus on other aspects of your
website.

Tracking items on the back end

Since logistics has become so complex and reliant on digital technology, there are options for
you to keep tabs on your inventory and where it is in the supply chain. Inventory
management solutions within your ecommerce platform give you visibility into how much of
a given product you have left. Inventory management tools give you real-time insight into
your products so you're never behind on customer orders.

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If your business partners with a service like UPS, FedEx or the USPS, you can also track
items based on the fulfillment numbers they provide. Once the product leaves your hands, it
may be a good idea to keep tabs on certain orders to make sure they reach the customer. It's
also an industry best practice to provide the same tracking numbers to customers in their
confirmation email so they can keep track of where their package is.

E-commerce industry seems to be the in thing in the present economic scenario. It has been
estimated that about 80 percent of retailers believe that online sales have gone up in the past
five years. In fact, the sales have gone up as high as 25 percent. But with the e-commerce
emerging as the next big thing, there is a need for a new logistics approach. People venturing
in this sector and selling to consumers and business online have to deal with the fact that they
just cannot deliver the product over the internet. Therefore, the boom in the e-commerce
sector has made a significant impact on the distribution network process. The conventional
firms are transformed into logistic companies.

It is also necessary to understand the role that logistics play in the e-commerce sector. The
main role is basically to reduce the risk that may arise through the virtual transactions to as
low as possible. This is done by ensuring that the right product is delivered at the right place,
and at the right time. But getting the product delivered to the doorsteps of the customer on
time is a rather tricky task and the successfully performing this task depends on the
effectiveness of their distribution networks.
Though e-commerce industry gained reorganization in the past decade, but nothing much was
done in the field. Fortunately, things picked up and today everyone has come up with a plan.
These plans can vary according to the choices and liking of the retailers. The retailers can let
the third-party service providers who specialize in e-commerce or otherwise chose to partner
with another retailer who is building his own e-commerce distribution network that it
independently owns and operates.
Determining transport strategy is an integral part of logistics in the e-commerce business.
Most companies are of the opposite opinions and are trying to identify their multi-channel
strategies. But once, it is decided then the question of how to implement the strategy
throughout their distribution networks comes up and the retailers have to find the most
effective way.

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The approach that is most often taken by retail shippers is that they need to meet customer
demand considering both delivery and transportation perspective. E-commerce has gone up in
the recent years and people have got accustomed to it which in turn has encouraged the
retailers to raise the standard of their services. Thus, being familiar with logistic management
and strategizing your distribution networks will definitely give the head start to remain ahead
in the e-commerce sector.
"Amateurs talk about tactics but professionals study logistics." Robert H. Barrow, USMC,
Commandant of the US Marine Corps, 1980.
As the value of commodities like oil continue to drop, countries and corporations are coming
to grips with 2 realities. The first is the value of e-commerce as a strategic marketing and
selling mode for all their other products and services. The second is that the cost and
efficiency of e-commerce depends on the cost and efficiency of logistics; the cost of
delivering a package. Increasingly, Amazon is examining the logistical business models of
UPS. Shipping costs have gone from 11.7% of revenue vs. 10.4% of Amazon's revenue a year
ago. The average cost of handling a parcel was $6.50 in 2000 and grew to $8.00 in 2013. This
increase reflects the fact that UPS, one of Amazon's primary logistics providers, invested $11
billion to upgrade and expand its logistics network. Amazon is evidently considering
providing its own organic logistics services. The UPS hub-spoke system whereby packages
move from shipper to a sorting hub to the brown-colored van to your home is now considered
obsolete. Amazon has poached more than 40 UPS supervisors and executives in the last three
years.
One of ElonMusks' innovations with Tesla is the elimination of the standard model of
logistics for getting cars from the factory to the consumer. The factory-dealership-consumer
model has been eliminated. The automobile is no longer just a means of transport; its battery
is a power plant.
As a former military logistics officer, freight forwarder and customs house broker, I am
naturally intrigued by the relationship between e-commerce and logistics. Military officers
developed Electronic Data Interchange or EDI in order to resupply surrounded Berlin after
WWII. Former logistics officers were recruited (as civilians) to make the logistics of
Walmart, Home Depot, ToysRus and Costco work.
One of the other reasons for being intrigued by logistics results from having studied
operations research in grad school and studied the transportation/allocation problem and
having applied it in resupplying Marine units in the field at the National Training Center at
Twenty-Nine Palms, (lovingly named Twenty-Nine Stumps) by Marines and in daunting
places like the High Sierras during record high snowfalls.
Alibaba provides it's organic logistics to some 200 cities in China. As it deploys its ecommerce platforms globally, the Chinese company must provide logistics as well as
financial support services for its global deployment. Walmart, Amazon, E-Bay, GE, and other
21

e-commerce platforms must likewise consider what their global deployment models will be
as they scale across the globe. As Sun Tsuwrote, the line between disorder and order lies in
logistics.

Role of Logistics in e-Commerce

Theres a good chance that that you or someone you know has purchased something online
over the past few years. Consumers are clicking order now buttons to buy shoes from
specialty online-only stores, household goods from omni-channel retailers with both brickand-mortar and online stores, and everything from plumbing fixtures to antiques from online
malls.
Driven by technology and consumer preference, e-commerce (short for electronic commerce)
is on the rise around the globe and across the country. Forrester Research predicts that by
2017, e-commerce sales will reach $370 billion, an increase from 8% to 10% of all U.S. retail
sales.

E-COMMERCE & ITS GROWTH IN INDIA

India had an internet user base of about 354 million as of June 2015 and is expected to cross
500 million in 2016. Despite being the second-largest userbase in world, only behind China
(650 million, 48% of population), the penetration of e-commerce is low compared to markets
like the United States (266 million, 84%), or France (54 M, 81%), but is growing at an
unprecedented rate, adding around 6 million new entrants every month. The industry
consensus is that growth is at an inflection point.
In India, cash on delivery is the most preferred payment method, accumulating 75% of the eretail activities. Demand for international consumer products (including long-tail items) is
growing much faster than in-country supply from authorised distributors and e-commerce
offerings.

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In 2015, the largest e-commerce companies in India were Flipkart, Snapdeal, Amazon India,
and Paytm.

Market size and growth

India's e-commerce market was worth about $3.9 billion in 2009, it went up to $12.6 billion
in 2013. In 2013, the e-retail segment was worth US$2.3 billion. About 70% of India's ecommerce market is travel related. According to Google India, there were 35 million online
shoppers in India in 2014 Q1 and is expected to cross 100 million mark by end of year 2016.
CAGR vis--vis a global growth rate of 810%. Electronics and Apparel are the biggest
categories in terms of sales.
According to a study conducted by the Internet and Mobile Association of India, the ecommerce sector is estimated to reach Rs. 211,005 crore by December 2016. The study also
stated that online travel accounts for 61% of the e-commerce market.
By 2020, India is expected to generate $100 billion online retail revenue out of which $35
billion will be through fashion e-commerce. Online apparel sales are set to grow four times in
coming years.
Key drivers in Indian e-commerce are:

Large percentage of population subscribed to broadband Internet, burgeoning 3G

internet users, and a recent introduction of 4G across the country.

Explosive growth of Smartphone users, soon to be world's second largest smartphone

userbase.

Rising standards of living as result of fast decline in poverty rate.

Availability of much wider product range (including long tail and Direct Imports)
compared to what is available at brick and mortar retailers.

Competitive prices compared to brick and mortar retail driven by disintermediation

and reduced inventory and real estate costs.

Increased usage of online classified sites, with more consumer buying and selling
second-hand goods

Evolution of Million-Dollar startups like Jabong.com, Saavn, Makemytrip,

Bookmyshow, Zomato, Voonik etc.

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India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675 Bn
by 2016 and $850 billion by 2020, estimated CAGR of 10%. According to Forrester, the ecommerce market in India is set to grow the fastest within the Asia-Pacific Region at a
CAGR of over 57% between 201216.
As per "India Goes Digital", a report by Avendus Capital, a leading Indian investment bank
specializing in digital media and technology sector, the Indian e-commerce market is
estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a
sizable portion (87%) of this market today. Online travel market in India is expected to grow
at a rate of 22% over the next 4 years and reach Rs 54,800 crore ($12.2 billion) in size by
2015. Indian e-tailing industry is estimated at Rs 3,600 crore (US$800 million) in 2011 and
estimated to grow to Rs 53,000 crore ($11.8 billion) in 2015.
Overall e-commerce market is expected to reach Rs 1,07,800crores (US$24 billion) by the
year 2015 with both online travel and e-tailing contributing equally. Another big segment in
e-commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator
websites.
New sector in e-commerce is online medicine. Companies like Reckwing-India, Buyonkart,
Healthkart are already selling complementary and alternative medicine whereas NetMed has
started selling prescription medicine online after raising fund from GIC and Steadview capital
citing there are no dedicated online pharmacy laws in India and it is permissible to sell
prescription medicine online with a legitimate license.
Online sales of luxury products like jewellery also increased over the years. Most of the retail
brands have also started entering into the market and they expect at least 20% sales through
online in next 23 years.

Closures
Though the sector has witnessed tremendous growth and is expected to grow, many ecommerce ventures have faced tremendous pressure to ensure cash flows. But it has not
worked out for all the e-commerce websites. Many of them like Dhingana, Rock.in, Seventy
MM amongst others had to close down or change their business models to survive.

Infrastructure
There are many hosting companies working in India but mostof them are not suitable for
eCommerce hosting purpose, because they are providing much less secure and threat
protected shared hosting. eCommerce demand highly secure, stable and protected hosting.
Trends are changing with some of eCommerce companies starting to offer SaaS for hosting
web stores with minimal one time costs. Many eCommerce website builder companies are
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selling false dream of opening online store in minute and at no cost which is highly
confusing.
There could be various methods of ecommerce marketing such as blog, forums, search
engines and some online advertising sites like Google adwords and Adroll.
India has got its own version of Cyber Monday known as Great Online Shopping Festival
which started in December 2012, when Google India partnered with e-commerce companies
including Flipkart, HomeShop18, Snapdeal, Indiatimes shopping and Makemytrip. "Cyber
Monday" is a term coined in the USA for the Monday coming after Black Friday, which is
the Friday after Thanksgiving Day. Most recent GOSF Great Online Shopping Festival was
held during Dec 10 to 12, 2014.
In early June 2013, Amazon.com launched their Amazon India marketplace without any
marketing campaigns. In July 2014, Amazon had said it will invest $2 billion (Rs 12,000
crore) in India to expand business, after its largest Indian rival Flipkart announced $1 billion
in funding. In June 2016, Amazon agreed to invest another $3 billion to further pressure
rivals Flipkart&Snapdeal Amazon has also entered grocery segment with its Kirana now in
bangalore and is also planning to enter in various other cities like Delhi, Mumbai and
Chennai and faces stiff competition with Indian startups.

Funding
Some venture capital firms such as Accel Partners have invested in e-commerce companies,
such as entertainment ticketing website BookMyShow.com and B2B marketplace
Moglix.com.
Started in 2012, Hopscotch India focuses on bringing thousands of brands to moms in India.
They have raised USD 12.8 million in two rounds from 7 investors, including Facebook cofounder Eduardo Saverin.
Flipkart.comraised about USD 2.3 billion. On 10 July 2013, Flipkart announced it had
received $200 million from existing investors Tiger Global, Naspers, Accel Partners, and
ICONIQ Capital, and an additional $160 million from Dragoneer Investment Group, Morgan
Stanley Wealth Management, Sofina, Vulcan Inc. and more from Tiger Global.
In February 2014, online fashion retailer Myntra.com raised $50 million from a group of
investors led by Premji Invest, the investment company floated by AzimPremji, Chairman of
Wipro. May 2014 also witnessed an acquisition of Myntra by Flipkart reportedly for 2,000
crores.
In October 2014, Flintobox raised USD 300,000 from leading angels GSF Global,
Globevestor (USA), AECAL (Germany), and Mauj Mobile.
25

In July 2015, price comparison service website MySmartPrice raised $10 million from Accel
Partners and Helion Venture Partners.
In September 2015, PepperTap raised $36 million from Snapdeal and others.

Niche retailers
The spread of e-commerce has led to the rise of several niche players who largely specialize
their products around a specific theme. As many as 1,06,086 websites are registered daily and
more than 25% are for niche businesses.
During 2014, Royal Enfield sold 200 bikes of special series Online.
Online apparel is one of the more popular verticals, which along with computers and
consumer electronics make up 42% of the total retail e-commerce sales. Niche online
merchandising brands like Headbanger'sMerch, Redwolf and No Nasties partner with and
even help sustain independent musicians. Some established brands like Arvind are now
creating clothing lines just for the e-commerce markets. Some of the bigger online retailer
like VoxPop Clothing have secured multiple rounds of funding, the last round raising $1
million from Blume Ventures in 2014.
As these niche businesses get popular, they are slowly getting acquired by the big players.
BabyOye was acquired by Mahindra Retail, part of the $17 billion Mahindra Group. Ekstop
was acquired by the Godrej Group to complement their offline chain of Nature's Basket
stores.

Trends Driving E-Commerce Growth

A growing number of entrepreneurs are turning to online retail sales instead of traditional
brick-and-mortar locations. Cloud information storage and simple online payment solutions
like PayPal have made it easier to start and expand an online business. And even established
retailers are augmenting traditional store sales with e-commerce divisions.
Consumer shopping habits have changed, too driven in part by increased use of mobile
devices. Continued growth in tablet and smartphone use boosts the amount of time consumers
spend online and theyre more likely to shop there. More than 50% of consumers who shop
online use mobile devices for research, price comparisons and purchasing.
Whether on the go with a smartphone or relaxing at home with a smart TV, consumers favour
the convenience, selection and price-comparing ability of buying online. And retailers benefit
from the lower cost of setting up and maintaining their online business, versus traditional
physical outlets.

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27

LOGISTICS : THE GROWING PAINS OF INDIAN ECOMMERCE INITIALLY

Capturing Indias rapidly growing e-commerce market has been a holy grail of tech
entrepreneurs for years.India is a country with a booming economy, rapid growth of internet
penetration, and a market of 1.2 billion. Its also a place where consumers have a lot to gain
from not going to the stores. A shopping trip can mean being packed into trains like sardines,
navigating streets jammed with stalls and cow herds, or haggling with aggressive rickshaw
drivers. The city centers are chaotic, and the contents of a shopping list are distributed over
dozens of different stores or street stands. It seemed the perfect place to build a robust online
economy.

Indeed, a year ago the business hotels of Delhi, Bombay, and Bangalore were packed with
budding e-commerce entrepreneurs cutting deals with foreign VCs, who couldnt get their
money in fast enough. Investment firms poured 691 million into the top 52 companies, twothirds of that in fiscal 2011, according to the Delhi based investment bank Allegro Advisers.
The race was on, and startups started battling for primacy in verticals from cars to baby
products. But while a few well-funded juggernauts, like Flipkart, have succeeded in
establishing brands and conquering large parts of the market, none of the major players have
shown a profit, and few have even shown enough revenues to cover overhead after the cost of
goods and deliveries.
The road to becoming the Amazon.com of Indiaor even the diapers.comhas proved more
arduous and expensive than giddy investors had imagined in 2011. Problems with logistics,
payment gateways, and intense competition for too few customers have created an
environment in which companies are struggling to survive. As a result, investors are holding
their money close, creating a funding drought just as the industry hits major growing pains.
The war for each vertical has often become a test of who can outlast the siege of their
competitors, who can survive the longest in the face of price wars.
Indian e-commerce companies have had to overcome serious hurdles. Among the largest of
them is logistics. While major multi-nationals like DHL and Fed-Ex operate in India, goods
are normally shipped through smaller and much cheaper third party carriers. Different
carriers have to be used for different regions of the country. For orders sourced outside the
major cities, individual couriers often have to be hired to make last mile deliveries from dropoff points by bicycle. The difficulties and unreliability of the carriers has forced some of the
largest and best funded players, like Flipkart, to develop their own logistics arms to deliver
their packages. The decision however, carries massive capital expenses in an industry that is

28

still not standing on its own feet. It also means a huge increase in exposure, and a business
that is now seeking success in two industries instead of one.
Another difficult problem is that the Indian market demands a cash on delivery (COD)
option, in which the consumer pays the courier once they have received the product. Its a
hard problem to get around, because credit card penetration is relatively low in India, and
consumers are still not trusting of putting financial information into online forms. Indias
economy is largely informal, and Indian consumers are used to paying cash; only the most
high end of businesses accept credit cards.The problem is that the COD system creates a
delay in payment. Courier companies generally hold the money for two weeks, which means
that the e-commerce company has to restock inventory before the cash from its last sale has
arrived. It is also expensive, some couriers charging upwards of 3 percent for the service.
But the biggest hit comes from the much higher return ratesometimes up to ten percent
by consumers who simply changed their mind or could not be reached at home. These goods
cycle back into inventory after weeks, and carry a high cost of restocking and re-listing, and
sometimes have to be written off altogether.

Challenges Facing E-Retailers

While e-commerce offers online retailers a world of opportunity, success is defined by how
well they service and retain their customers, which is a function of logistics. Companies that
struggle to manage in-house logistics sometimes turn to third-party providers to handle
orders, inventory, shipping and returns.
Others bring logistics in-house to better control speed and accuracy of delivery both
increasingly important as consumers patience and error tolerance diminishes. After all, when
you order a blue sweater, you want the blue one, not the red one. And, you want to wear it
this week not next.
Looming over either logistics decision for e-retailers is the need to rein in shipping costs.
Free or low-cost shipping is a major lure for online shoppers, and is becoming expected for
large purchases.
The return process can also offer challenges for e-retailers because customers cannot simply
bring a damaged or incorrect item back to a store. Retailers, either purely online or brick-andmortar operations with online sales, have to provide an efficient return process, or reverse
logistics, that is customer-friendly.
They also have to invest in proper packing to prevent shipping damage, parcel tracking and
labeling processes that traditional brick-and-mortar retailers do not have to deal with.

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E-COMMERCE LOGISTICS & CHANGING B2C DELIVERY

LANDSCAPE

All of us understand and appreciate the future growth prospects of the e-commerce market
and how this industry is giving a run of the money to the brick and mortar traditional
retailers. Consequently the Supply Chain and Logistics for running such firms is getting
redefined the way these functions are being managed by an e-tailer (includes the supply
chain/logistics tools needed), is different from the traditional firms. E commerce industry has
thrown new challenges to the logistics and supply chain areas. This point of view examines
some of the key e-commerce logistical challenges and how these logistical challenges are
being met, especially by the Express and Parcel industry players.

E Commerce Logistics Challenges

In E-Commerce, Customers need faster deliveries (same day). There are multiple lead time
requirements based on the customers requirements. Other complexities include moving from
pallet to piece pick at all levels of the supply chain. Complexity in deliveries - from few
retailer addresses to numerous customer address; and add to it the high return flow. The
challenge is to create an optimal network per product/ market combination - While
Traditional Fulfilment logistic solutions are mostly sufficient, need is for Specific
solutions for E-fulfilment.
Some of the key differences between a traditional supply chain or logistics requirement vis-vis an eCommerce focused business are as follows:

Emerging E Commerce Logistics Models

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It is interesting to know and understand how e-commerce companies are managing their
distribution network consisting of huge number of suppliers and customers, keeping in mind
the order size and volumes as described above. What kind of logistics strategies do these
companies use to manage the distribution network of this new kind of logistical challenges?
Do they manage their logistics on their own or do they prefer using logistics service providers
(LSP)? Are the Logistics service providers capable enough to provide the services demanded
by the customers of the e-commerce companies (fast & free) and if yes, at what cost? Ecommerce orders are completely changing the B2C delivery landscape.

Evolving Distribution and Fulfilment Model of E-commerce Companies

Globally it has been seen that due to the unique e-commerce distribution network
requirements most of the e-commerce companies use a hybrid model. Most of them feel that
the logistics service providers are not quite good enough to service all of their service
requirements. This has led to these companies themselves managing some part of the
distribution and fulfilment network of the supply chain. In some markets it has been seen that
e-commerce companies are setting up the last mile delivery capability; somewhere they
manage the distribution center on their own and so on. These models are still evolving and it
is common to see that some parts of the logistics chain are outsourced to the LSPs (either
3Pls or Express/Parcel companies) and some parts being managed in-house.

Speed Matters in E-commerce logistics

From Weeks to Days to Same day delivery - Future is Delivery in Hours. Amazon has
redefined e-commerce logistics in many ways including launching intra-day delivery for
major markets

Changing Delivery Models

From Hub & Spoke model to point-to-point deliveries from a store/fulfilment centre directly
to the customer to make the delivery in hours

Creation of Access Points and Integration with Orders and Service Providers

Home is not necessarily where e commerce deliveries are made. Office deliveries, deliveries
near to office or home at convenient locations/kiosks, customized delivery hour window are
all redefining the B2C delivery requirements.. This has led to creation of unique delivery
models at some pre-defined stores or access points. Unique business models has been created
by some service providers to cater to this kind of delivery/pickup/return access points which
helps the customer, retailers as well the logistics service providers.

Mobility Applications playing a key role in E-commerce deliveries

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Mobility is playing a key role in the end to process of e-commerce logistics. Applications
Right from pickup to delivery (including delivery signature), tracking based on order number,
customized delivery windows, integration with access points are playing a major in ecommerce logistics.

Focus on Rural Delivery

Currently e-commerce orders are driven from major locations but as this industry would grow
& the internet would expand in rural areas (especially for countries like India) there would be
focus on rural delivery. This would pose another challenge in terms of network strength as
well as cost of delivering at these remote locations. I think Postal companies can play an
important role in rural expansion of e-commerce deliveries as they already have the network
in place all they need is customer focus and increasing their IT capabilities.

Importance of Cash on Delivery (COD) Services

COD services would play an important role (again in some specific geographies like India)
where people prefer to pay after getting the goods. Another reason for preferring COD
services would be limited usage of internet banking/credit card etc. in rural areas. This is a
specialized service and the industry needs hassle free solutions from LSPs for delivery of
goods, collection of cash and transfer to the supplier. Logistics solutions combined with
financial solutions would help penetrate new customers/market for e-commerce business.

Rising Importance of Courier, Express and Parcel (CEP) players in the Ecommerce business
When e-commerce companies came into business and started looking at LSPs to manage
their logistics, the CEP companies (UPS, Fedex, DHL & so on) became their preferred
partner especially for the last mile delivery as the CEP companies were most suited for this
kind of operations. While 3PLs were more suited for managing the DCs, the real focus of this
industry was on the services being provided by CEP kind of companies.
Though CEP companies were used to handling small packets, fast deliveries and home
deliveries; but E-commerce business provided a new set of challenges. The CEP Service
Providers are trying to realign their services to cater to the ecommerce deliveries - They
needed to relook at their complete network including the line haul and last mile delivery
process they had created. The IT platform and visibility required in e-commerce business also
posed new challenges to the logistics companies. The e-commerce companies needed a
unified platform wherein customer orders are linked with suppliers to logistics to payments
and so on and that too on a very tight timeline. The visibility CEP companies need to provide
to the customers maintaining the linkages between orders, shipments and other important
business details on a very were very granular level. These requirements gave birth to a lot of
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specialized logistics companies focused on e-commerce business. So along with the

established players a new set of logistics companies are being established which is helping in
providing the required e-commerce logistics solutions. Within established players most of
them are setting up specialized business units to provide solutions to provide e-commerce
business. There are also companies focusing on setting up access points for e-commerce
deliveries, intraday deliveries and other specialized solutions. The focus of this industry is to
provide fast services as well as to reduce the cost of delivery.

Gaining a competitive advantage in e-commerce means finding a balance of the right item
price, customer service and delivery time. Some of the largest e-retailers have implemented
same-day delivery to woo customers who cant or wont wait for even next-day service.
To compete, leading brick-and-mortar retailers have turned to omni-channel commerce
turning stores into distribution hubs to combine online and in-store experiences. This allows
customers to order items online and pick them up at the store, or order online and have the
product shipped to their home from the store instead of a distribution facility. The proximity
of stores to customers may even allow same-day deliveries.

Gaining a Competitive Edge Through Logistics

The pressure to satisfy todays tech-centered consumer with outstanding service and speedy
delivery is forcing traditional retailers to shift tactics or risk losing sales to massive online
retailers. The key is in implementing warehouse management systems (WMS) software that
enables centralized tracking and management of stock levels, locations, and fulfillment.
Onmi-channel retailers that ship from the stores may need a slightly different WMS that
handles online orders because stores themselves will become mini-warehouses.
For traditional retailers, the decision to outsource e-commerce logistics to a third-party
logistics (3PL) provider typically depends on one factor: sales volume. Lower sales can mean
in-house logistics. As volumes increase, the specialized services, equipment, systems and
expertise a 3PL provider can offer become crucial to keeping customers satisfied.
3PL providers can employ specialized warehouse management systems designed to handle
the differences in inventory management between stocking a traditional retail store and filling
online orders.

33

INDIAN LOGISTICS INDUSTRY: CURRENT SCENARIO &

FUTURE OUTLOOK
(with reference from DTDC Courier & Cargo Ltd.)
Logistics is the backbone of the economy, providing the efficient, cost effective flow of
goods on which other commercial sectors depend. The logistics industry in India is evolving
rapidly and it is the interplay of infrastructure, technology and new types of service providers
that will define whether the industry is able to help its customers reduce their logistics costs
and provide effective services.
Despite weak economic sentiments, the logistics & warehousing industry continued to
witness growth largely due to growth in retail, e-commerce and manufacturing sectors. The
Global Logistics sector is expected to grow at around 10-15% in the period 2013-14. With
this forward looking attitude and a promise of growth and improvements, the service oriented
logistics industry is all set to expand beyond the horizons in the latter half of this decade,
utilizing this fiscal year as its launch pad.

Following are the key challenges faced by logistics industry:

Poor Infrastructure
One of the major critical challenges faced by companies today is of insufficient
integration of transport networks, information technology (IT), warehousing and
distribution facilities.
Trade Regulations
Regulations exist at a number of different tiers, imposed by national, regional and
local authorities. Regulations often differ from city to city, hindering the creation of
national networks.
Trained Manpower
Trained Manpower in both the third party logistics sector and the manufacturing and
retailing sectors is very weak at a practical level, i.e., IT, driving and warehouse as
well as at a higher strategic level.

34

Lack of Training Institutions

The disorganized nature of the logistics sector in India, its perception as a manpowerheavy industry and lack of adequate training institutions has led to a shortfall in
skilled management and client service personnel.
Information and Communications Technology
There are a lack of IT standards and poor systems integration and equipment.
Poor Warehousing and Storage
Poor facilities and management are to blame for high levels of loss, damage and
deterioration of stock, especially in the perishables sector. Part of the problem is
insufficient specialist equipment, i.e. proper refrigerated storage and containers, but it
is also partly down to lack of training.
Lack of research and development (R & D) of the industry
Although both the practitioners and the academicians are increasingly aware of the
importance of logistics and supply chain, however the field is still under penetrated as
far as research is concerned. It is important to prioritize research and development so
that various weaknesses in the industry could be identified and improved.

Possible solutions to some of the challenges:

Infrastructural Improvements
Needless to say, infrastructure is the backbone of every countrys growth and
prosperity and for the logistics industry to flourish in the developed countries, special
emphasis has to be laid on the enhancement of the infrastructural facilities. Particular
focus needs to be given on building world-class road networks, integrated rail
corridors, modern cargo facilities at airports and creation of logistics parks which
need to be given a status equivalent to Special Economic Zones.
Creating Awareness & Establishing Training Institutions
Overcoming the skill gap in Indian logistics industry requires establishing training
institutions. It is necessary to realize the benefits which best practice in logistics can
bring to the companies so that the overall service quality of the sector is improved.
Gaps in training have to be filled not only at the entry level but also in the
management cadre which could be made possible through specialized graduation and
post graduation courses focused on Operations and Supply Chain management.
35

Improving Warehousing facilities

Good storage and Warehousing facilities are essential to the growth of the logistics
industry. With the increase in the transportation of perishable products, agencies
associated with logistics will have to give a lot of importance to enhancing the
Warehousing facilities. Warehousing will also need to go to the next level taking into
account the changing dynamics of JIT manufacturing, global procurement and new
models of sales and distribution.
Encouraging Research and Development (R&D)
Emphasizing on R&D is essential mainly because it encourages the use of indigenous
technology which can make the industry more cost competitive and it also leads to the
improvement in services due to the use of better and more streamlined services.
Particular focus needs to be given on research in process excellence which can help
eliminate inefficiencies and bring Indian logistics on par with global practices.

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. To support
Indias fast paced economy growth of logistics industry is very essential. 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:

In 2014 the Global economic outlook and indeed that of India is expected to significantly
improve as India Inc begins to tackle the economic downturn. With a new government set to
be in place in 2014, many policies are expected to be implemented which will give a fresh
impetus to Indias growth engine particularly in the corporate and SME sector which in turn
will expand demand for the logistics sector. The biggest boost to the growth of the industry is
coming from the increasing consumer demand, particularly in the Tier 2 and 3 sections of the
country. This is being further fueled by the revolutionary growth 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.

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LOGISTICS TO BE THE GAME CHANGER FOR ECOMMERCE

E-commerce has seen an unprecedented rise in business in the past year, with Paytm joining
Flipkart and Snapdeal in the eight-member unicorn club. A report by Bank of America Merrill
Lynch in 2015 stated that the e-commerce market in India will be worth $220 billion by
2025. Yet, e-commerce is beyond just sales and GMV numbers. Speed of delivery is as
important as the product quality for a customer. It would not be wrong to say that logistics
could be the defining factor for success of e-commerce companies in retaining their
customers.
At present, the countrys logistics industry is worth $300 billion, according to the Logistics
Market in India 2015-2020 by market researcher Novonous . In fact, the report states, Indian
logistics market itself is estimated to grow at a CAGR of 12.17 per cent by 2020. Innovations
are very important in this sector, as the demand is always for more reach and faster shipping
at lower costs. Yet, the companies will need to invest in automation, while utilising existing
resources well.

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Lessons from 2015

It would suffice to say that 2015 was the year of logistics for e-commerce in India, with many
startups coming up in the space, and investments flowing into them. Online marketplaces
such as Snapdeal, Flipkart, and Paytm came up with innovative strategies in logistics and
supply chain management, backed by ample investment.
Following the most significant trend in 2015, Snapdeal took the hyperlocal route and
launched SnapdealInstant to allow delivery of packages to customers within an hour of
placing the order. Having received a whopping $500 million in funding in 2015, Snapdeal
also launched four-hour delivery, card-on-delivery, and 90-minutes reverse pickups. At
present, the company is fulfilling 60 per cent of its orders from its own fulfillment centres, as
compared to the seven per cent at the start of 2015.
Amazon added eight new fulfillment centres this year, increasing their storage capacity to
nearly five million cubic feet across all 21 centres in India. Amazon claims that this is the
largest storage capacity and warehouse infrastructure in India in the e-commerce industry.
Investing in better data analytics and forecasting customer demands was the mantra for the ecommerce players looking to cut down cost of deliveries. Flipkart tied up with partner stores
that act as alternative delivery channels, so that customers can pick up their shipments at their
convenience. By bringing together core capabilities of IoT, devices, data and automation, we
have started implementing the automation technology to pick and move packages to
designated picking station, among several other applications that make warehouse processes
quicker and smoother, said a spokesperson from Ekart, the logistics arm of Flipkart.
Local networking for faster deliveries also gained momentum in 2015. Paytm launched a
two-hour delivery model for mobile phones, similar to Snapdealsomni-channel strategy. Efulfilment centres and return processing centres have also aided Paytms growth in 2015.
RenuSatti, Vice President, Paytm, said: Increasing the reach of our delivery network by
partnering with local delivery companies was another focus area [in 2015]. Going forward in
2016, a lot of focus will be on strengthening city local delivery network and setting base for
local fulfillment.
Shopclues claims that its logistics initiatives have ensured better delivery service level
agreements (SLA). Vishal Sharma, Vice President, Operations, said: We have invested and
developed technology that integrates with 90 per cent of our third-party logistics partners to
ensure faster tracking and information flow between merchants and customers. This has
resulted in faster shipping, integrated tracking and real-time updates on deliveries both in the
forward as well as returns.

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Vehicle tracking crucial in e-commerce

Since the logistics market is highly unorganised in India, under-utilisation of resources is not
surprising. Increasing adoption of technology in operations is essential to keep up customer
satisfaction. AshishChitravanshi, Vice President, Operations, said that Snapdeal has been
building strategic technology solutions that are leveraged by its third-party logistics partners
to improve tracking of shipments. Amazon added that fast, reliable and resourceful internet
connectivity across devices will help us use technology better for vehicle tracking.
Vehicle tracking plays a significant role in providing necessary control and effective route
planning for faster delivery. In September 2015, Paytm invested in logistics solutions
provider Loginextto exploit tech ecosystem for supply chain. Flipkart benefited by its
investment in Blackbuck in capturing data on vehicular movement and utilisation, and
utilising the data for better planning. The efficiency improvement on information gathering
and orchestration is a primary focus area for us in the next year as well, the Ekart
spokesperson said.
Technological developments in logistics have surely surpassed manual methods in connecting
sellers, third-party logistics partners and customers. It has also made possible card on
delivery, electronic proof of delivery etc., for these players. Logistics solutions provider
Loginextwhich caters to Paytm, Myntra and Amazon among otherseven provides heat
maps for giving information on those areas where maximum delays are happening.
Manish Porwal, Business Development Manager at LogiNext, said: We are also working
with cold chain logistics service providers for delivering perishables. Our scheduler takes
input from the system about the products being transported and accordingly schedules the
deliveries. Also, the temperature and other settings required for a particular product could be
set via our app used by delivery boys.
Shopclues strategy is to work with third-party logistics partners which have enabled vehicle
tracking or working toward adding on this function. However, infrastructural improvements
are essential for seamless tracking, said Vishal of Shopclues. Vehicle tracking in India is
primarily dependent on the mobile infrastructure available. Inadequate coverage across the
country affects tracking of vehicles, he added.

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Significance of Tier II and Tier III

The higher affordability of 3G and 4G smartphones has given rise to more orders from Tier II
and III cities. Snapdeal gets 60 to 70 per cent of its orders from Tier II and III cities, while
Flipkart gets only 20 per cent of its orders from those areas.
Despite the handicaps caused by inadequate coverage, e-commerce majors have come up
with innovations for high-speed delivery. Snapdealhas built its supply chain towards many
regions of the country like the North East. We have the widest delivery network and
therefore clearly see a direct correlation to the number of orders that we receive from the
region, said Ashish.
Flipkart claims that its algorithm on routing makes delivery and pick-up more accurate and
faster than anyone else in this business. Flipkarts investment in MapMyIndiahas helped the
company too. Ekart spokesperson said: The accurate address data for both sellers and
buyers will allow us to better schedule deliveries and pickups.
Going a step further, Amazon India has engaged with an NGO in a pilot project of rural
delivery network in Tier III IV towns, through logistics firm Connect India E-Commerce Pvt.
Ltd., incorporated by founders of BASIX group. The plan is to ensure last-mile delivery with
the help of the well-established rural distribution network of BASIX.
According to Samuel Thomas - Director, Transportation, Amazon India, the company
received 65 per cent orders from Tier II and III cities in 2015. To establish rural distribution
centres in rural India, Amazon has been training teams in packaging, checking shipments,
tracking deliveries through a mobile app, route planning to make deliveries on time etc.
Samuel said that many of these centres have witnessed a five-fold increase in the number of
deliveries.
Amazon has a service partner programme too for last-mile delivery in remote areas.
Budding entrepreneurs in these areas act as Amazon.ins local distribution network providers
and create the last-mile delivery footprint. This programme now covers more than 100
satellite towns and Tier II and III towns and villages, Samuel added.

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Turn to 2016
Money will be flowing into developing logistics for e-commerce this year. Having invested in
B2B logistics startup Blackbuck, Flipkart has announced that it will be putting in $2.5 billion
into logistics needs over the next four to five years. Besides roping in GoJavas, Snapdeal
made six acquisitions last yearmost in technology and logistics sectorsreducing its delivery
times by 70 per cent.
Transportation expert Jaspal Singh, Partner at Valoriser Consultants, said: Logistics system
in India is underdeveloped and there is no big player that can provide pan-India access at
economical cost. We will surely see some strategic partnership among logistics players to
distribute the delivery load.
A lot of the trends observed in 2015 are expected to continue in 2016 too. The Ekart
spokesperson said that while technology-enabled supply chain will see greater penetration
into Tier II and III cities, highly personalised and specialised services are also required. Ekart
added that specialised cargo delivery will add to the complexity [of delivery] in 2016.
Roads are sure to continue as the most important mode of transport, but improvements are
essential here as well. The Union governments decision to earmark 20 per cent of the $1trillion reserved for infrastructure brings hope in this direction. Jaspal believes since the cost
of manpower is rising, there is a possibility of sharing of resources among logistics
companies to reduce the delivery time. There is need to look for consolidation and sorting of
packages at a central location irrespective of the e-commerce company, he said.
After Loginext and Grey Orange, there is a possibility that the likes of Roadrunnr and
Delhivery might be the next ones to tie up with the biggies. With Amazon, Flipkart, Snapdeal,
and even Paytm expected to overtake even offline biggies, taking a leap of faith in logistics
seems like the inevitable next step.

E-Commerce Is the Future

Technology has broken down barriers to make it easier to start and grow a business online
in every industry. As consumer demand continues to drive e-commerce, more retailers large
and small will need to offer customers this option done well or risk obsolescence. A
strong mobile presence, in-stock merchandise, and fast delivery are important keys to ecommerce success, and a strong argument for top-notch logistics solutions.

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III. THIRD PARTY LOGISTICS

3PL SERVICES IN INDIA
Typically, a core company providing services or products is considered the first party; the
customer, the second party. A third-party, then, is a firm hired to do that which neither the
first or second party desires to do. A third-party logistics firm is a firm that provides
outsourced or third party logistics services to companies for some portion or all of their
supply chain management functions. 3PL typically specializes in custom clearance, Freight
Forwarding, Warehousing, transportation services that can be customized to customer needs
and demand.
The 3PL industry evolved in the 1970s when during a time of expanding globalization and
an increased use of information technology. The first generation 3PLs (1970s-1980s)
offered services such as transportation, brokerage, and shipping. Second-generation 3PLs
(1980-1990) were mostly asset or non-asset based companies with increased service
offerings. The third-generation-3PLs (2000 onwards) were mostly web-based 3PLs with
increased supply chain integration.
Third-party logistics (3PL) is gaining importance as more and more organisations across the
world are outsourcing logistics activities to the 3PL service providers. By outsourcing
logistics activities, organisations are able to not only concentrate on their core business
operations, but also achieve cost-efficiency and improve delivery performance and customer
satisfaction.
The 3PL market in India was under-developed and highly fragmented. However, recent
trends show that the Indian market has come of age with small family-run businesses giving
way/progressing to professional-run corporate enterprises. This refreshing change is indeed a
welcome sign for the growth, as professionalism can go a long way in building efficiencies
and reducing costs.

The principle reasons for firms using 3PL services can be attributed as under:

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 Globalization of sourcing, manufacturing and distribution leading to an increase in the

complexity of material movement.
Competition that has forced companies towards more responsiveness and a reduction in
inventories. There is an increased need for small but frequent shipments with 100 percent
reliability, requiring core competence in logistics management.
Resource constraints that require companies to concentrate only on their core manufacturing
or new product development activities.
In the 3PL industry, some service providers have high standardized service offerings. This
enables the provider to benefit from increased economies of scale, risk sharing, and volatility
smoothing. However, providing standardized services in a cheaper way is no longer sufficient
for 3PL firms. Second, with the constant shift in client business, more customized and valueadded services are required.
Therefore, it is argued that 3PL firms need to provide more than standardized services.
Innovation and new service development are vital for 3PL firms. Because different clients
have different needs, differentiating logistics services is essential for a 3PL provider's
business.

The Indian Transport Infrastructure

Indias Logistics Industry is characterized by the dominance of disorganized operators.
Transporters with a fleet of less than 5 trucks account for 2/3rd of the total trucks owned and
operated in India. They generate revenue of around 80%. Likewise; there are thousands of
small Custom House Agents and Freight Forwarders, who cater to local requirements.
However, companies are seeking services beyond transportation and Custom clearance,
which is why Trucking and courier companies are leveraging their networks to provide
express distribution and warehousing, Freight Forwarders are moving towards owning assets
in the form of Container Freight Stations, Inland Container Depots and Container Trains.

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44

Although it is well known that a well-developed logistics infrastructure can lead to significant
savings in terms of service levels, inventory costs and processing time, India continues to
spend relatively more on logistics due to inadequate infrastructure.
Logistics costs are estimated to be as high as 13-14 per cent of the GDP compared with
seven-eight per cent in the developed countries. And at a GDP of over $1 trillion, this
represents a cost disadvantage of over $50 billion in logistics in the country. Development of
extensive road network along with hinterland connectivity, rapid implementation of the
dedicated rail freight corridors, capacity expansion beyond the major ports sector and
establishment of modern cargo handling facilities at airports are some of the challenges
before the growth of the domestic logistics industry.

Challenges in the Indian Logistics Sector

The infrastructural bottlenecks:
Infrastructure is one of the biggest challenges faced by the Indian logistics sector and has
been a major deterrent to its growth. Infrastructural problems like bad road conditions, poor
connectivity, inadequate air and sea port capacities and lack of development of modes of
transports like railways and alternates like inland water transport and domestic aviation have
been constant irritants. Due to the infrastructural bottlenecks costs per transaction in Indian
logistics sector is very much high compared to those in the developed markets.
Transport of freight by road forms an important component of freight movements within
India, with a large chunk of goods, over 65 percent, being moved by road. The poor
infrastructure has severely crippled the smooth functioning of logistics operations. With
narrow and congested highways, poor surface quality of roads and 40 percent of villages not
having access to all-weather roads, the efficiency of the transport system is severely affected.
Pathetic road conditions combined with the fact that India is perhaps one of the least
connected regions in the world constitute a major impediment. Poor connectivity via roads
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and railways to ports, warehouses and logistics hubs is major infrastructural bottleneck.
Movement of goods within the country is fraught with delays and risks.
The bulk of Indian trade is carried by sea routes and the existing port infrastructure is
insufficient to handle trade flows effectively. The current capacity at major ports is
overstretched and their infrastructural upgrades are being made at very slowly pace. While
Shanghais ports can turnaround a container ship in 8 hours, the same ship in Mumbai takes 3
days. Air cargo handling facilities at mini metros and towns are negligible as to be nonexistent.
The failure in augmenting the freight carrying capacity and efficiency of the railways has
denied the logistics sector cheaper and efficient mode of transport. Comprehensive inland
waterway systems, which India has in plenty and can act as auxiliary mode of transport, has
been neglected. There is a huge requirement for air cargo centers due to growth in air cargo as
well as upgradation of infrastructure at various airports.
The Indian government has started paying attention to the problems being faced by the
logistics sector and has initiated several infrastructural projects to mitigate their woes.
Projects like rail freight corridors and development of the inland waterways as a means of
developing alternative modes of transport are being planned. Some important steps are being
taken in augmenting the rural infrastructure like connecting majority of the habitations with
all weather roads, construction of new roads and upgrading of existing ones etc. New port
and a large container handling facilities are on the cards. But all these are still not sufficient
to cater to the growing needs of the economy.
For cost effective movement of goods it is essential to have quality infrastructure in place.
The challenge is to meld the different modes of transport together into seamless network such
that the cost is at the lowest. The development of world class infrastructure like modern
integrated logistics cum transport hubs and freight corridors at major locations across the
country will facilitate more efficient logistics operations. To help Indian logistics sector
overcome the challenge and make them globally competitive it is imperative to remove the
infrastructural bottlenecks and plan new projects taking into consideration the future growth
requirements.

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Categories of 3 PL Providers
1) Standard 3PL providers: this is the most basic form of a 3PL provider. They would perform
activities such as, pick and pack, warehousing, and distribution (business) the most basic
functions of logistics. For a majority of these firms, the 3PL function is not their main
activity.
2) Service developers: this type of 3PL provider will offer their customers advanced valueadded services such as: tracking and tracing, cross-docking, specific packaging, or providing
a unique security system. A solid IT foundation and a focus on economies of scale and scope
will enable this type of 3PL provider to perform these types of tasks.
3) The customer adapters: this type of 3PL provider comes in at the request of the customer
and essentially takes over complete control of the companys logistics activities. The 3PL
provider improves the logistics dramatically, but do not develop a new service. The customer
base for this kind of 3PL service is quite small.
4) The customer developers: this is the highest level that a 3PL provider can attain with
respect to its processes and activities. This occurs when the 3PL provider integrates itself
with the customer and takes over their entire logistics function. These providers will have few
customers, but will perform extensive and detailed tasks for them.

3PL Pyramid
The concept of 3PL has been developed from the need to extend transportation services by
transportation companies to its customers. Basically, 3PL might be defined as outsourcing of
transport and logistics activities to outside companies that are neither consignors nor
consignees. Usually there is outsourced more than one activity, including storage,
warehousing, and transportation. 3PL came into existence during the deregulation of freight
transport industry in the 1980s and has progressed in the 1990s along with the development
of information technologies.
The PL Pyramidbelow from 1PL to 5PL might be described as a downstream change of
functions in terms of transport/logistics services

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Most small businesses buying and selling in the same location are 1PL. As the business
expands geographically, the manufacturers logistics border extends, a 2PL provider is
generally a commodity capacity provider, such as a trucking company or a warehouse
operator, a 2PL provides service for a single or a small number of functions in the supply
chain. They face low returns, with high levels of asset intensity but low barriers of entry.
With the increasing demand for one-stop solutions, many 2PLs have evolved into 3PLs by
adding new logistics capabilities and integrating their operations. It may or may not involve
asset ownership. 3PL is a broader term that is frequently used to cover businesses in freight
forwarding or contract logistics. It performs all or a large portion of a clients supply chain
logistics activities and its value adding is based on information and knowledge versus a non
differentiated transportation service at the lowest cost. 3PL tends to be asset light with high
returns. The 4PL provider is essentially a logistics integrator or a one-point contact for the
manufacturers logistics outsourcing requirements. They are responsible for contracting
various 2PL and 3PL providers, and for assembling and managing those end-to-end solutions.
The 4PL provider, with its complete overview of the supply chain as well as strong logistics
and IT capabilities, can also offer high value added advisory services to the manufacturer.
Most 2PLs companies strive to become 3PLs for higher returns. While 3PLs do own some
assets such as key distribution centers in strategic locations or a small trucking fleet to fill
emergency needs, they may have outsourced most of their capacity needed by 2PLs.Hence
the terms 3PLs focus on logistics solutions and look for the optimal combination of assets
available from capacity providers (i.e. 2PLs), 3PLs are less asset intensive. Their logistics
management expertise makes them increasingly counter-cyclical the worse the cycle, the
more companies need to optimize their supply chains. Moreover, the more integrated the
service of 3PLs, the closer they are to the customers operation.
This closeness makes 3PLs indispensable to the customer, as the 3PL provider becomes more
a partner than a supplier. A customer is more reluctant to change its 3PL provider than a 2PL.
The services of 3PL sometimes overlap with the 4PLs. The 4PL segment is more lucrative
because these companies charge consulting fees. Currently, 3PL companies are trying to turn
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themselves into 4PL companies in providing better service satisfaction to their related
customers. We can say that 4PL is based on the development of 3PLs and as it is an extension
of 3PL, it provides value added service such as planning, information technology integration,
transport planning, order tracking and tracing, logistics consulting, application solution, and
financial services. But all these functions focus on improving a close linkage with its served
customer. From the logistics company to its consigners, as a 3PL company its task is to
transport the goods from consigner to consignee, and to be a 4PL provider, 3PLs need to find
ways to build strong relations between themselves and their customers, with the above
mentioned supporting function to reach the highest level of service efficiency i.e., 4PL is
integrated logistics management. There is also a new approach of logistics concept that might
be defined as 5PL. The 5PL solutions focus on providing overall logistics solutions for the
entire supply chain. Supply Chain Management (SCM) is the integration of the activities
associated with the flow and transformation of goods in the respective logistics networks
through improved supply chain relationships based on a common collaborative performance
measurement framework for attaining close, collaborative and well-coordinated network
relationships to achieve a competitive edge.

Growth of 3PL Industry in India

3PL industrys origin in India can be traced back from the late 80s to mid 1990s. The
industry was pioneered by global logistics majors as a part of extending these services to the
Indian subsidiaries of multinational companies in automobile, electronics and FMCG sectors.
Indian subsidiaries of multinational companies in these sectors took cue from their parent
companies and began to outsource a share of their logistics functions to these specialist
service providers. Though insignificant in the first few years, Indian 3PL industry is
experiencing a rapid growth after year 2000 due to the liberalization of policy and opening up
of Trade. The number of participants in this industry had grown to be more than 1200 by year
2010.
The Indian 3PL industry can be divided into three distinct tiers National Major 3PL
companies with nationwide presence, Regional 3PL companies with strong presence in one or
two regions, and Small Remote 3PL companies.

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Why do Companies Outsource Logistics to 3PL providers.

With the increasing focus of business expansion into the global market, companies need to
have an extremely lean and efficient supply chain to achieve success and integrate into global
markets.
3PL providers can not only help provide services to these companies, but also assist the more
localized companies looking to cut operational costs or focus on core competencies.
There are many advantages to outsourcing logistics services to third parties which are
mentioned below.
Focus of Core competencies.
Cost Reduction for Manufacturers by freeing up own resources.
Risk sharing.
Access to resources like shipment tracking and real time tracking.
Better Cash Flows with funds not locked in Inventories, Transport costs, etc.
Constant Changes in Regulatory Framework (e.g. Free Trade Zones, Exemptions,
Customs EDI, VAT, etc.) can be updated by the 3PL service provider.
Some reasons for outsourcing
Some of the typical drivers for organizations across the world to outsource their logistics
activities include:
Globalisation. With globalisation and ease to trade, organisations are increasingly sourcing,
manufacturing and distributing on a global scale. This renders their supply chains extremely
complex to manage. Thus their logistics activities are increasingly being farmed out to
experienced 3PLs, who have global reach, sophisticated IT platforms, and state-of-the-art
transportation networks.
Effectiveness. Logistics may not be the core activity of an organization. By outsourcing
logistics, organization can re-focus on their core competency and thereby, manage their
resources more effectively.
Cost. By outsourcing logistics, organizations can reduce both fixed and variable costs as the
3PLs can leverage on their economies of scale which is sometimes not available to mid-sized
regional manufacturers.

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 Customer satisfaction. Ideally, logistics outsourcing improves the cycle time and delivery
performance, thereby increasing customer satisfaction throughout the chain.
Value-added services. Since 3PLs now offer a range of value-added services, such as multi
country consolidation, channel management, after sales services, and life cycle management,
organizations can benefit from the richness of such services.

Selecting a 3 PL Service Provider

Today, 3PLs are more than just transportation providers; they are becoming involved in the
long-term strategic direction of their client companies. The key to successful outsourcing of
logistics services lies in finding a 3PL provider that has the most strategic fit with the
companys goals. The most important step in selecting a 3PL provider is to ensure the
decision is a collaborative one made by representatives of all departments within a company.
Meritex Logistics in the USA have come up with a 9 step plan for companies in deciding a
3PL service Provider.
1. FORM A CROSS-FUNCTIONAL TEAM
2. SET OBJECTIVES
3. DETERMINE CUSTOMER SERVICE REQUIREMENTS
4. DEVELOP A LIST OF CANDIDATES
5. EXPLORE INTEREST AMONG 3PL CANDIDATES
6. SOLICIT REQUESTS FOR PROPOSALS
7. VISIT THE PROSPECTIVE PROVIDER'S FACILITIES
8. REVIEW QUALIFICATIONS
9. IMPLEMENT THE SELECTION PROCESS AND CHOOSE YOUR BEST CANDIDATE

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3PL services: Capabilities, Opportunities and Challenges in India

Success in todays business depends on superior supply chain planning and execution. Supply
chain speed and flexibility have become two key levers for competitive differentiation and
increased profitability. Within a global trade environment, one of the biggest challenges is the
ability to manage seamless forward and backward flows of material and information. Faced
with increased global competition in the past two decades, a popular strategy adopted by
many successful companies to address these challenges involves outsourcing logistics and
supply chain activities/processes to reliable third party logistics providers (3PLs) and
focusing on core competency.
Globalization, development of information and communication technologies, as well as
supply chain network optimization is reshaping trade flows. In the future, the logistics
outsourcing industry will be more global, diversified and concentrated. With the help of stateof-the-art technologies, more 3PLs will be gearing up to meet the demand growth and
improve their services offerings by incorporating newer value-added services and
customizing their supply chain management solutions.
Indeed, logistics outsourcing continues to expand in the Asia-Pacific. With more than 84 per
cent of companies operating in the Asia Pacific relying on 3 PLs, the logistics outsourcing
industry in this region greatly attracts global 3PLs notably in countries like China and India.
However, challenges, such as poor infrastructure, complex regulations and industry readiness,
still remain.

Outsourcing services provided by 3PLs

To continue to satisfy customer requirements, the 3PLs service industry is also evolving to
offer greater scope and more integrated solutions. While 3PLs continue to offer the basic
traditional logistics services (e.g. custom clearance, transportation and warehousing), they
also provide integrated logistics solutions, such as vendor management and inventory
financing.

There are three levels of outsourcing:

Transactional Outsourcing. This is based on cost and activity transactions, with no long
term contracts and partnership between the 3PL and outsourcing company.
Tactical Outsourcing. This mode of outsourcing is practiced on a mid-to-long term basis
with negotiation contracts and integrated IT systems to facilitate better information flow and
to create supply chain visibility.
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 Strategic Outsourcing. In this level, sometimes known as best sourcing in some sectors,
long-term relationships are formed, with successful outcomes and 3PLs become key partners
in a companys supply chain management and transactional transparency is maintained on a
mutual trust basis.
In the early years, 3PLs only provided core services such as transportation, warehousing and
Customs clearance. At this stage, the relationship between the 3PLs and the customer was
strictly contractual, and services were charged by transactions. Later on, with an extended
service scope, 3PLs began to provide both core and extended services, including inbound and
outbound-centric 3PL services and freight forwarding. Nevertheless, the relationship
remained contractual and services were charged either of transactions or based on fixed
pricing. Both of these two stages are labeled as transactional outsourcing as no bond exists
between the 3PL and the customer.
As customers seek integrated supply chain services, Lead Logistics Providers (LLP) evolved
to serve them. Such LLPs are usually large global logistics players who have the capabilities
to execute all of the logistics activities within their organization. At this stage, the LLPs share
information as well as risk with their customers. Although the relationship between service
providers and customers remains contract based, the duration of this contract is mid-term or
long-term and risk sharing becomes evident.
In the last stage, the 3PL become a strategic partner with the customer. Risk and benefits are
mutually shared. The relationship is transformed from contractual to one of collaborative
partnership.

Opportunities and Challenges in India

The Indian logistics industry has evolved from being labour intensive during the 1960s to the
present technology oriented system, which produces a wide range of logistics services. The
concept of 3PLs is recent. Traditionally, manufacturers in India have managed their own
logistics requirements. Gradually, Indian organizations outsource their labour requirements to
avoid labour-related issues. Subsequently, basic services, such as transportation and
warehousing, were outsourced to 3PLs. In recent years, domestic and foreign 3PLs began
integrated services as well as value-added services.
The logistics market in India is huge but unexploited. Unlike China, the development in
Indias logistics market is relatively slow and still in the infancy stage. However, with the
entry of several foreign 3PLs into the market, domestic 3PLs realise the importance of supply
chain management and are now trying to provide integrated logistics services to remain
competitive. According to a survey on the practices of the logistics industry in India,
warehouse, inbound and outbound transportation, customs clearing and forwarding are the
most frequently outsourced activities. Activities such as packaging, fleet management and
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consolidation are growing in popularity. Also more manufacturers are planning to use 3PL
services. As such, we anticipate that the logistics outsourcing market and the 3PL will
continue to grow.
This then suggests some opportunities for local and foreign 3PLs. A list of some of these: Research & Development of IT-enabled logistics. India is a globally acknowledged IT
powerhouse. This strength must be exploited by Indian companies to develop specific
capabilities of IT-enabled logistics, such as the development of logistics planning and coordination systems. With the increasing trend towards 3PL services, these capabilities will be
highly valued.
Agriculture logistics. Although the Indian economy is driven by the agricultural sector, less
attention has been paid to logistics in this sector. Moreover, since the break basket are quite
distant from the urban consumer base, there are opportunities for 3PLs to focus on the
inefficiencies in the agricultural logistics services and coordinate the movement of food
products across the country.
Logistics for large infrastructure projects. Economic development in India has led to several
large infrastructure projects, such as the construction of airports, seaports, industrial parks
and national highways. Previously, such projects
have always run into budget overruns as well as delays. Through proper logistics
management and coordination of various activities, these overruns can be reined.
Cold SCM. There is a severe shortage of reefer warehouses and reefer transport in India.
With very few Cold SCM operators and large number of MNCs requiring these services,
there is ample scope in this field.

Despite these opportunities, the Indian logistics industry is still considered to be relatively
underdeveloped. Some challenges hindering the growth of logistics industry and 3PL
services in India are: Poor infrastructure and transport vehicles. Poor infrastructure and transport vehicles are a
major hindrance. Although freight movement in India is increasing at 10 per cent a year, the
infrastructure capacity is not being augmented, or better managed to meet the growing
demand. As a result, performance declines and costs rise. In some cases, capacity is
inadequate and even the available capacity is in dire need of maintenance.
Complex Tax laws. The complex tax laws on the implementation of VAT that vary across
the states are another major concern for 3PLs. In an ideal situation, a uniform VAT across
states will essentially enable consolidation of warehousing which in return results in far
greater efficiencies. However, given that there is still no consensus on VAT, companies are
holding back investments in logistics. Another tax issue that is discouraging the 3PLs in India
is the service tax on warehousing. Hence it may be cost effective for a company to keep
warehousing as an in-house activity, as outsourcing this activity means factoring in the
service tax.
Complexity in international trade documentation process and lack of IT infrastructure.
Another factor contributing to inefficiency is the complexity of the international trade
documentation process. While countries such as Singapore and Hong Kong have
implemented automated trade systems e.g. TradeNet and Digital Trade Transportation
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Network to facilitate trade documentation process and custom permit applications, in India,
this issue has not been resolved yet.
Industry readiness. Compared with the equipment and technologies used in developed
countries, those used in India are not comparable in terms of sophistication. For example, in
the warehousing sector, while Automated Storage and Retrieval Systems (ASRS) and
Warehouse Management Systems (WMS) are commonly used to control the movement and
storage of material handling systems in the Indian Industry, leading to improper stacking and
storage.
Lack of training and trained personnel. There is a complete lack of training in logistics in
India with no dedicated institutions for the cause. The only recruitment is by taking on
graduates and training them on the job, which is a time consuming process; while the
logistics industry is booming at an increasing pace. This is causing a sharp disparity between
the skill required and skill available. There is a clear need for dedicated, practical, oriented
institutes churning personnel to meet and update the growing needs of industry.
Overall, the 3PL market in India is quite young, with high growth potential. While the
insufficient infrastructure, bureaucracy, complex tax and lack of training may hinder the
development of 3PL services in India, more Indian firms are becoming aware of the benefits
of 3PL services and are outsourcing a part or whole of their logistics-related activities to these
3PLs.

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IV. COLD CHAIN LOGISTICS

Cold chain is a logistic system that provides a series of facilities for maintaining ideal storage
conditions for perishables from the point of origin to the point of consumption in the food
supply chain. The chain needs to start at the farm level (e.g. harvest methods, pre-cooling)
and cover up to the consumer level or at least to the retail level. A well-organized cold chain
reduces spoilage, retains the quality of the harvested products and guarantees a cost efficient
delivery to the consumer given adequate attention for customer service. The main feature of
the chain is that if any of the links is missing or is weak, the whole system fails
.
The Cold chain logistics infrastructure generally consists of
Pre-cooling facilities
Cold Storages
Refrigerated Carriers
Packaging
Warehouse and Information Management systems
Traceability
Financial and Insurance Institutions
The temperature controlled supply chains or cold chains are a significant proportion of the
retail food market. Fast foods, ready meals and frozen products have increased market share
in recent years. There are several food temperature levels to suit different types of products.
Frozen, cold chill, medium chill, and exotic chill are some of the frequently nomenclatures
with identified temperature ranges. The range of temperatures is dependent on the products
whether it is meat or ice cream or potatoes or bananas. Failure to maintain appropriate
temperature regimes throughout the product life cycle may shorten the product life or
adversely affect its fitness for consumption. Cold chain management involves maintaining
appropriate temperature regime when the product travels from the farm in Himachal Pradesh
to the consumer in London or New York City. That is why the logistics challenge is
formidable in food chains, which is cost conscious industry. There are several governmental
regulations in all countries and the responsibility to maintain hygiene and standards falls on
the food retailer or manufacturer. The recent developments in electronic tagging could be
useful for monitoring the temperatures and also the shelf life of the product. The Government
statistics indicate that India has about 5,400 cold storage facilities with a total capacity of
about 24 m.tons.

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Uttar Pradesh, West Bengal and Maharashtra lead the States in having the biggest numbers of
cold-chain facilities. According to a FICCI study, about 30-35 per cent of the country's 60
m.tons of fruits and vegetables produced get wasted due to inadequacies in cold storage and
other facilities. In value terms, food worth Rs 58,000 crore gets wasted in India, which is
more than the total production of fresh fruits and vegetables in the UK. The CII has estimated
that India's cold-chain infrastructure will require at least Rs 18,000-20,000 crore investment
over the next five years to meet the growing requirement of this facility, while the industry
size, at the current pace, will grow from Rs 8,000-10,000 crore to Rs 40,000 crore by 2015.
While fruits and vegetables are subject tos easonal production and have a year-long
consumption, milk and meat have a small shelf life. In terms of transportation, there are only
about 5,000 reefer trucks that move non-milk commodities across the country. One vegetable
the potato accounts for almost 90 percentof the total volume of cold infrastructure.
Guided by such statistics, an integrated cold chain seems to be the obvious answer. We have
only two companies, Radhakrishna Foodlands and Snowman, dictating a small segment of
the cold chain in poultry. There is no comprehensive national policy that promotes cold chain.

The Scenario Today

The cold supply chain business has obviously not lived up to its promise. Except for a few
examples, India has a totally un-integrated cold supply chain. In some pockets, individual
entrepreneurs have ventured into the cold storage business. Most of these are of poor
technical design and do not adhere to the international standards of storing and stacking.
Pharmaceutical companies in Asia and the USA are constrained by laws to use the cold chain
for their supply chain; in India the companies hardly use the cold chain.
With regards to the dairy industry, there are few large organized players despite the year
long demand. In ice creams, small players have as much as 35 percent of the market share.
Overall, the scene in the cold chain supply chain seems like the next big thing that never
happened, a sort of broken promise.
Regulations in cold storage infrastructure allow 100 percent Foreign Direct Investment (FDI).
This consists of coolers, warehouses, reefer trucks, retail locations, chillers, etc. The Union
Budget of 2010-11 provided for accelerated depreciation among other benefits. Yet very little
FDI or local investments have come in. Temperature zoning, air curtains, air locks, etc. are
not being used effectively or at all.

INTRODUCTION :
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India is the largest producer of fruits and second largest producer of vegetables in the world.
In spite of that per capita availability of fruits and vegetables is quite low because of post
harvest losses, which account for about 25% to 30% of production. Besides, quality of a
sizable quantity of produce also deteriorates by the time it reaches the consumer. This is
mainly because of perishable nature of the produce, which requires a cold chain arrangement
to maintain the quality and extend the shelf life if consumption is not meant immediately
after harvest. In the absence of a cold storage and related cold chain facilities, the farmers are
being forced to sell their produce immediately after harvest which results in glut situations
and low price realization. It is estimated that due to lack of proper facilities of transportation
andstorage, about 33% of produce, especially fruits and vegetables are wasted i.e. about 20
million tons or 200 lakh tons are wasted. During the peak harvesting season, excess produce
gets over flooded and many -a-times, due to lack of storage facilities let alone cold storage
facilities- gets damaged and totally wasted, whereas an artificial scarcity gets developed
during non-harvesting periods and prices soar and many times, we have to import these goods
at exorbitantly high prices.
The major important fruits and vegetables grown in India are:
Fruits: Apples, Mangoes, Grapes, Oranges, Bananas, Papaya, Pomegranate, Litchi, etc.
Vegetables: Potato, Onion, Tomato, Cabbage, Cauliflower. Peas, Okra (Ladies Finger),
Garlic, Ginger, Brinjal (Egg Plant), Green Chilies etc.
Other important Dry Fruits, Fruit Juices, Chemicals, Dairy Products, Ice Creams, Food items
are Frozen meat, Sea foods like Shrimps, fish etc and eggs.

STATUS OF COLD STORAGE AND ITS POTENTIAL IN INDIA :

The estimated annual production of fruits and vegetables in the country is about 130 million
tonnes. This accounts for 18% of our agricultural output. Due to diverse agro climatic
conditions and better availability of package of practices, the production is gradually rising.
Although, there is a vast scope for increasing the production, the lack of cold storage and cold
chain facilities are becoming major bottlenecks in tapping the potential. The cold storage
facilities now available are mostly for a single commodity like potato, orange, apple, grapes,
pomegranates, flowers, etc. which results in poor capacity utilization. Present availability of
cold storage capacity is only 103.5 lakh tonnes, out of which units having about 8 lakh tonnes
capacity are non functional. Although 90% of these units are made to store only potato even
then it does not meet the requirement of the single crop, the production of which is about 300
lakh tonnes. Out of 3443 cold storage units setup till 1988, 2012 units were for potato, 447
units were for multipurpose use, 198 units were for fruits and vegetables and the remaining
were for products like meat, fish, milk, etc. The details of the commodity wise distribution of
cold storage capacity are given below.

Commodity wise Units

distribution of cold

Capacity
tonnes)
58

(lakh

storage
capacity
Commodity
Potato
Multipurpose
Fruits & Vegetables
Meat
Fish
Meat & Fish
Milk
&
Dairy
Products
Others

2,012
447
198
23
360
30
272

92.82
7.63
1.07
0.09
0.73
0.15
0.68

101

0.36

Of the above 3443 cold storage units, 2975 are in private sector, 303 are in cooperative sector
and the rest are in public sector.
According to the information collected by the expert committee on cold storage and storage,
requirement of cold storage in the next five years may be in excess of 12 lakh tonnes. The
working group of the planning commission for IX plan had assessed new cold storage
capacity for fruits, vegetables and multi commodity as 15 lakh tonnes; 13 lakh tonnes in
private sector, 1.5 lakh tonnes in cooperative sector and the rest 0.5 lakh tonnes in public
sector. Thus, there remains a vast potential to be tapped.

STORAGE OF FOODS AND STORAGE CONDITIONS :

Foods and many other commodities can be preserved by storage at low temperature, which
retards the activities of micro organisms. Micro organisms are the spoilage agents and consist
of bacteria, yeasts and molds. Low temperature does not destroy those spoilage agents as
does high temperature, but greatly reduces their activities, providing a practical way of
preserving perishable foods in their natural state which otherwise is not possible through
heating. The low temperature necessary for preservation depends on the storage time required
often referred to as short or long term shortage and the type of product.
In general, there are three groups of products:
1. Foods that are alive at the time of storage, distribution and sale e.g. fruits and vegetables,
2. Foods that are no longer alive and have been processed in some form e.g. meat and fish
products, and
3. Commodities that benefit from storage at controlled temperature e.g. beer, tobacco, etc.
Living foods such as fruits and vegetables have some natural protection against the activities
of micro organism. The best method of preserving these items is to keep the product alive and
at the same time retard the natural enzyme activity which will retard the rate of ripening or
maturity.
Preservation of non-living foods is more difficult since they are susceptible to spoilage. The
problem is to preserve dead tissues from decay and putrefaction. Long term storage of meat
and fish product can only be achieved by freezing and then by storing it at temperature below
-15 o C. Only certain fruits and vegetables can benefit from freezing. However, for fruits and
vegetables one should be very careful about the recommended storage temperature and
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humidity a deviation from which will have adverse effect on the stored product leading to
even loss of the entire commodity.
Products such as apples, tomatoes, oranges, etc. cannot be frozen and close control of
temperature is necessary for long term storage. Some product can also be benefited by storing
under controlled atmosphere and modified atmosphere conditions.
Dairy products are produced from animal fats and therefore non living foodstuffs. They suffer
from the oxidation and breakdown of their fats, causing rancidity. Packaging to exclude air
and hence Oxygen can extend storage life of such foodstuffs. The storage requirement of
some of the important commodities are as below

Desired Storage Environment of Fruits and Vegetables in the cold storage

Commodity
Temperature (o C)
Apple
-1 - 3
Apricots
-0.5 - 0
Avocado
7 - 13
Asparagus
0-2
Beans, green
4-7
Beet root
0-2
Broccoli
0-2
Black berry
-0.5 - 0
Cabbage
0-2
Carrots
0-2
Cauliflower
0-2
Cherries
0.5 - 0
Cucumber
7 - 10
Brinjal
0-2
Grapes
-1 - 1
Lemons
4 - 15
Lettuce
0-1
Lime
3 - 10
Mango
11 - 18
Melon water
2-4
Orange
0 - 10
Peach
-1 - 1
Potato
1.5 - 4

Relative Humidity (%)

90 - 98
90 - 95
85 - 90
95 - 97
90 - 95
95 - 97
90 - 95
95 - 97
90 - 95
90 - 95
90 - 95
90 - 95
90 - 95
90 - 95
85 - 90
86 - 88
95 - 98
85 - 90
85 - 90
85 - 90
85 - 90
88 - 92
90 - 94

ECONOMIC SIZE OF UNIT AND LAND REQUIREMENTS :

Cold storage units can be used to store either a single commodity or multiple commodities.
Depending upon the entrepreneur's financial health; it can be planned to store the produce
entirely owned by him or on rental basis or in combination of the two. Financial viability of a
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unit depends upon the intended pattern of use and rental rate prevalent in an area. However,
units entirely to be used by the owners are also considered for sanction. Considering 70:30
utilisation of the capacity for rentals and own use, a 5000 MT capacity unit is considered as.

OPPORTUNITIES FOR COLD SCM ( COLD CHAIN) :

The total cold chain market in India is worth Rs. 21,375 million. Chiller Segment, which
includes Fruits & Vegetables packhouses, Potato, apple contributes Rs 16050 million to the
cold chain market. It is at a threshold of exponential increase due to developments taking
place in food and retail industry of India.
Potatoes: The production of Potatoes varied between 200 lakh M.tons to 300 lakh M.Tons
p.a. from the year 2008. The total cold store capacity in the country was for about 103 lakh
tons numbering 3443. Out of these about 2012 are for potatoes, 447 for multipurpose and 198
for fruits and vegetables and others for miscellaneous items. Considering the total cold
storage capacity available and the increased production due to increase in productivity etc.,
there is still a wide gap between production and cold storage capacity. This results in severe
losses to farmers due to inadequate storage capacity.
Onions: India is the largest producer of onions in the world. Onion is an important vegetable
crop. It is available in plenty during the season and is very cheap and within reach of poorest
of the poor. It is grown mainly in the states of Maharashtra, Bihar, Karnataka, Gujarat,
Andhra Pradesh, Uttar Pradesh, Orissa and Madhya Pradesh. The size of the Onion crop in a
year depends upon weather conditions. It has been in the range of 40 to 60 lakh tons about 5
years ago and is now expected to be about 70 lakhs tons due to increased productivity. In
some years of excessive rains / scanty rains / delayed rains the crop gets affected and results
in low production or sometimes even after good production, because of lack of storage
facilities it gets spoilt and then prices shoot up beyond the reach of the common consumers.
The 1997-98 year showed an unprecedented hike and onions had to be imported from various
countries at a very high price. Hail storm and sudden drop in soil temperature affected the
root activity and bulb formation and hence acute shortage of the product. Traditionally,
onions are stored by conventional methods in various parts of the country. These include
hanging bunches along with top, storage in various types of godowns. Some of these are
provided with ventilation from side and bottom, so that heat
generated is not accumulated in the godown. The losses in weight due to shrinkage varies
from 10% to 35% due to drying, 10 to 12% by decay and 8 to 12% by sprouting depending
upon RH and temperature during the rainy season. The total loss varies from 30% to as high
as 56% depending on the type of storage construction used. Refrigerated cold storages for
onions are almost non-existent, but efforts in that direction are being seriously now given.
Mangoes: Mango is the National Fruit of India. India is the largest producer of mangoes in
the world with more than 12 million tonnes of production per annum. There are a number of
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various varieties-easily exceeding a thousand but the highest rated of them is the popular
Alphanso from Ratnagiri in Maharashtra. The share of exports is less than 0.6 % of the global
trade. The scene, however, is changing for the better. There is a growing realization about
Indias advantage as a Mango producing country and an increasing urge to use these
advantages of high Quality, tastes and varieties, to capture the global markets. It accounts for
more than 50% of world production.
Apples, Grapes, Oranges etc:India is a major producer of these as well. There is a growing
need to develop a complete cold chain right from harvesting to exporting of these products. A
large number of pre-cooling units with required temperature and high humidity are already in
use for grapes. They reduce the shrinkage and weight loss to a mere 1% or less.
Retail: Retail is Indias largest industry, accounting for over 10 per cent of the countrys GDP.
The businesses started with traditional corner stores and have emerged to supermarkets and
modern retail stores.

INCREASING AWARENESS :
About 30% of the fruits and vegetables grown in India get wasted annually due lack of
awareness about proper handling and storage requirements as well as poor infrastructure,
insufficient cold storage capacity, unavailability of cold storages in close proximity to farms,
poor transportation infrastructure, etc. As a result only 2% of products that should be
temperature controlled are handled this way today-a figure that stands in stark contrast to the
15% in China, and 85% compliance with good cold chain practices found in Europe and
North America. Even for Asia Pacific region as a whole the comparative figure is about 8%
based on share of refrigerated transport in the entire transport market.

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CONCLUSION
Indian Logistics industry is continuously improving its performance in the global logistics
industry by improvement of customs, trade-related infrastructure, inland transit, logistics
services, information systems, and port efficiency help to provide trade goods and services on
time and at low cost. The World Bank's 2007th Global Logistics Report ranks India 39
amongst 150 countries in terms of logistics performance during the year as well as its future
potential. Indian Logistics industry has low performance than developed countries like USA,
UK and Singapore in global logistics sectors due inefficiency in logistics services and highest
among the low-income group countries. India spend in Logistics activities equivalent to 13 %
of its GDP is higher than that of developed countries. The key reason is the relatively high
level of inefficiency in the system with lower average trucking speeds, higher turnaround
time at ports and high cost of administrative delays. 3PL service provider share is less in
logistics sector in India as compare to developed countries and still at the nascent stage.
Multinational companies in all industries have been predominant users of this service as one
of reason for lesser share 3PL in India. Also in India organised sector not well established as
compare to developed nation this contain cost of inventory holding, transportation,
warehousing, packaging, loss and related to administration is higher. In Indian logistics sector
major sector investors are Aviation, Metal & Mining and Consumer Durable. Also logistics
industry in India improves the performance of other industries year to year and share of
logistics cost in sale also important which is maximum in cement sector. Transportation
modes grow with of domestic and international market and in India road better mode
of transportation because of well infrastructure of roads in India as compare to other mode
like water, rail and sea. Road freight in India grows with increase of domestic and
international trade also large area coverage. Railway freight also increases due low freight as
compare to road but cover some of area and better for long distance movement of goods. Sea
freight also increase better for overseas movement of goods at low cost as compare to air but
consume more time as compare to air. Air mode of transportation is also helps in both
domestic and international movement of goods but for international movement is more as
compare to the domestic due to the higher cost, safe and faster way as compare to others
modes.

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