LOGISTICS MANAGEMENT

UNIT 2
Learning Objectives
• CO.SC10202OS.1 (Apply): Illustrate the role of
transportation in logistics.

• Transportation: The Backbone of Logistics;

• Logistics Packaging;
• Distribution Integration;
• Logistics Optimization using QT
Transportation: The Backbone of
Logistics;
• Transportation modes and mix decision
• Factors influencing transportation cost
• Transportation network and route planning
Transportation: The Backbone of
Logistics;
•
• https://transportinindia.wordpress.com/2016/11/28/transport-in-india-
indian-road-transportation-logistics/

• https://www.linkedin.com/pulse/indian-linehaul-trucking-freight-rates-
2021-ramratan-singhi?trk=read_related_article-card_title

• The Future of Logistics

• https://www.youtube.com/watch?v=6EDCnhbUpgE
• The Future of Travel
• https://www.youtube.com/watch?v=j_-HHbRa8-w
MEANS OF TRANSPORT IN INDIA:
Þ ROADS
Þ RAILWAYS
Þ PIPELINES
Þ WATERWAYS
Þ AIRWAYS
Ministry of Road Transport and Highways was formed in 2009 by
bifurcating the erstwhile Ministry of Shipping, Road Transport and
Highways into two independent Ministries, i.e., Ministry of Road
Transport & Highways and Ministry of Shipping.
Roads
• The total length of roads in the country of about 62 lakhs
K.M. Of these 57% are surfaced roads. Roads in India are
grouped into 7 categories on the basis of their construction
and maintenance.
• National Highways
• Freeways Highways
• International Highways
• State Highways
• District Roads
• Village Roads
• Border Roads
Road
• Road Transport is a critical infrastructure for the economic
development of a country. It impacts the pace, structure and pattern
of development. The tasks and responsibilities of the Ministry of Road
Transport and Highways encompass, inter alia, construction and
maintenance of National Highways (NHs); administration of the
highways through- National Highways Act,1956; National Highways
Authority of India Act, 1988; National Highways Fee (Determination of
Rates and Collection) Rules, 2008; Motor Vehicles Act 1988; and
Central Motor Vehicles Rules 1989, as also formulation of broad
policies relating to road transport and automotive norms, besides
making arrangements for movement of vehicular traffic with
neighbouring countries.
• The capacity of National Highways in term of handling traffic
(passenger and goods) needs to keep pace with economic growth.
India has the second largest road network in the world of about 62.16
lakh km. This comprises National Highways, Expressways, State
Highways, Major District Roads, Other District Roads and Village
Roads as under:
• National Highways 1,36,440 km
• State Highways 1,76,818 km
• Other Roads T 59,02,539 km
• Total 62,15,797 km
Railways
• The Railways are the main artery of inland transport in India. The
railways are 150 years old in India. The first train moved between
Mumbai and Thane in 1854.
• Indian Railways is among the world’s largest rail network, and its
route length network is spread over 67,956 kms, with 13,169
passenger trains and 8,479 freight trains, plying 23 million
travellers and 3 million tonnes (MT) of freight daily from 7,349
stations. India's railway network is recognised as one of the
largest railway systems in the world under single management.

• The railway network is also ideal for long-distance travel and

movement of bulk commodities, apart from being an energy
efficient and economic mode of conveyance and transport. Indian
Railways is the preferred carrier of automobiles in the country.
• Market Size
• Revenue growth has been strong over the years. Indian Railways’
gross revenue stood at Rs 174,660.52 crore (US$ 24.78 billion) in
FY20. Freight earnings in FY20 stood at Rs 113,487.89 crore (US$
16.24 billion). Passenger earnings for Indian Railways was at
50,669.09 crore (US$ 7.25 billion) in FY20. Passenger revenue is
expected to fall by ~72% YoY to ~Rs. 15,000 crore (US$ 2.0 billion) in
FY21 due to COVID-19.
• Freight remains the major revenue earning segment for Railways,
accounting for 65% of its total revenue in FY20, followed by the passenger
segment. In FY20-21, Indian Railways recorded the highest loading in
freight transportation. Freight traffic carried by Indian Railways stood at
1,232.64 million tonnes in FY21. With this, the freight revenue of Indian
Railways also increased to Rs. 1,17,386 crore (approx.) (US$ 16.04 billion)
for the year 2020-21, as against Rs. 1,13,488 crore (US$ 16.10 billion)
during fiscal 2019-20.

• Since August 2020, the Indian Railways has run 450 Kisan Rail services and
was able to transport over 1.45 lakh tonnes of agricultural produce &
perishables
• RailTel, a PSU under the Railway Ministry, which provides fast and free Wi-Fi across the
Indian Railways network, announced its highest ever consolidated income of Rs.
11,660.05 million (US$ 158.48 million) for FY19-20. This income figure is a growth of
12.3% over the consolidated income of the financial year FY18-19.

• In March 2021, Indian Railways achieved the highest freight loading of 130.38 million
tonnes, which is 27.33% higher than last year’s loading of 103.05 million tonnes. In
November 2020, India Railways announced that 40% of dedicated freight corridor (DFC)
will be opened for traffic by end-FY21, while the entire 2,800 km route will be completed
by June 2022.

• India was among the top 20 exporters of railways globally as of 2017. India’s export of
railways has grown at a CAGR of 31.51% during 2010-2018 to US$ 507.90 million. Exports
of railways in 2019E stood at US$ 635 million.
Government initiatives
• Few recent initiatives taken up by the Government are:
• Indian Railways has logged the highest ever electrification of sections covering 6,015
Route Kilometre (RKM) in a single year during 2020-21. More than 5 times electrification
was achieved during (2014-21) last seven years as compared to during 2007-14.
• In April 2021, Indian Railways completed the arch closure of the under-construction
Chenab Bridge which is the world’s highest railway bridge. Chenab Bridge is 1315 m long
and will be 35 meters higher than Eiffel Tower in Paris. The total cost of the bridge is
estimated to be Rs. 1,486 crore (US$ 200.46 million) and the design life of the bridge is
said to be 120 years.
• In FY21-22, the Indian Railways announced to complete several projects. The Railway
Ministry has identified 56 projects in various railway zones that will be completed in
February-March 2021.
• Under the Union Budget 2021-22, the government allocated Rs. 110,054.64 crore (US$
15.19 billion) to the Ministry of Railways.
• In February 2021, Minister of Railways Mr. Piyush Goyal dedicated 88
Railway projects to the country worth Rs. 1000 crore (US$ 138.14
million) in the states of Kerala, Tamil Nadu, Madhya Pradesh, West
Bengal and Karnataka.
• In February 2021, Indian Railways called for ‘Request for Qualification
(RFQ)’ for redeveloping New Delhi railway station under a public-
private partnership, with an estimated project cost of Rs. 5,000 crore
(US$ 690.75 million).
• To boost rail infrastructure and make the Indian Railways network
future ready, Indian Railways has identified 56 projects across the
country in various zones to be completed by Feb-Mar 2021 and FY22.
• In July 2020, the Ministry of Railways has invited Request for Qualifications (RFQ) for private
participation in operating passenger train services across 109 Origin Destination (OD) routes. As
part of the plan, the railways will introduce 12 trains in FY23, 45 in FY24, 50 in FY26 and 44 more
in the next fiscal, taking the total number of trains to 151 by the FY27. The project would entail
private sector investments of about Rs. 30,000 crore (US$ 4.09 billion).
• In November 2020, Indian Railways developed anti-COVID-19 coach to prevent the spread of
coronavirus. This anti-COVID-19 coach has hands-free water tanks and flushes; copper-coated
handles and locks.
• The Railway Minister, Mr. Piyush Goyal, announced on November 29, 2020, that tea will be sold in
environment friendly 'Kulhads' (earthen cups) in place of plastic cups at all railway stations in the
country. Currently, >400 railways stations serve tea in ‘Kulhads’. This strategy will be the
contribution of the Indian Railways towards a plastic-free India.
• As of October 2020, the Railway Ministry issued a policy to develop goods shed facilities at
small/roadside railway stations aimed at augmenting terminal capacity through the participation
of the private sector. Private parties are allowed to develop a goods wharf, utilities for labourers
(resting space, drinking water, etc.), approach roads, loading and unloading docks, and other
related infrastructure.
• On September 22, 2020, Indian Railways sanctioned a feasibility study for seven bullet
train projects - all open to PPP investments.
• In July 2020, The Ministry of Railways decided to create a special cell, Project
Development Cell (PDC), in the railway board to increase investments and inflow of
foreign direct investment (FDI).
• The Government is going to come up with a ‘National Rail Plan’ to enable the country to
integrate its rail network with other modes of transport and develop a multi-modal
transportation network.
• A 'New Online Vendor Registration System' has been launched by Research Designs &
Standards Organisation (RDSO), the research arm of Indian Railways, to have digital and
transparent systems and procedures.
• The Ministry of Railways plans to monetise assets including Eastern and Western
Dedicated Freight Corridors after commissioning, induction of 150 modern rakes through
PPP, station redevelopment through PPP, railway land parcels, multifunctional complexes
(MFC), railway colonies, hill railways and stadiums.
Revenue of Indian Railways
Waterways

• Maritime sector in India has been the backbone of the country’s trade and
has grown manifold over the years. To harness India’s 7,500 km long
coastline, 14,500 km of potentially navigable waterways and strategic
location on key international maritime trade routes, the Government of
India has embarked on the ambitious Sagarmala Programme which aims to
promote port-led development in the country.

• The concept of Sagarmala was approved by the Union Cabinet on 25th

March 2015. As part of the programme, a National Perspective Plan (NPP)
for the comprehensive development of India’s coastline and maritime
sector has been prepared which was released by the Hon’ble Prime
Minister, on 14th April, 2016 at the Maritime India Summit 2016
• The shipping industry is divided into several parts such as :
• Linear service: Is a service that operates within a schedule and has a fixed
port rotation with published dates of calls at the advertised ports.. A liner
service generally fulfils the schedule unless in cases where a call at one of
the ports has been unduly delayed due to natural or man-mad causes
• Tramp shipping: Tramp Service or tramper is a ship that has no fixed
routing or itinerary or schedule and is available at short notice (or fixture)
to load any cargo from any port to any port.
• Industrial services:
• Tanker operations
• Approximately 95 % of India’s merchandise trade (by volume) passes
through sea ports. Many ports in India are evolving into specialized
centres of economic activities and services and are vital to sustain
future economic growth of the country such as JNPT, Mundra Port,
Sikka Port, Hazira Port etc.
• However, Indian ports still have to address infrastructural and
operational challenges before they graduate to the next level. For
example, operational efficiency of Indian ports has improved over the
years but still lags behind the global average. Turnaround time (TAT)
at major ports was approximately 4 days in 2014-15, whereas global
average benchmark is 1-2 days. Some of the private sector ports in
India like Mundra and Gangavaram, have been able to achieve a
turnaround time of around 2 days.
• Secondly, last mile connectivity to the ports is one of the major constraints
in smooth movement of cargo to/from the hinterland. Around 87% of
Indian freight uses either road or rail for transportation of goods. A
significant share of this cargo experiences “idle time” during its transit to
the ports due to capacity constraints on highways and railway lines
connecting ports to production and consumption centers. Although water-
borne transport is much safer, cheaper and cleaner, compared to other
modes of transportation, it accounts for less than 6% of India’s modal split.
By comparison, coastal and inland water transportation contribute to 47%
of China’s freight modal mix, while in Japan and US, this share is 34% and
12.4% respectively. Significant savings can be achieved by shifting
movement of industrial commodities like coal, iron ore, cement and steel
to coastal and inland waterways.
Cost of transportation
MODE OF TRANSPORTATION TRANSPORTATION COST (Rs. /Ton-Km)
Road 2.0-3.0
Rail 1.2-1.5
Waterways 0.2 – 0.3
Pipelines 0.1-.15
Source : Ministry of Shipping

https://www.inboundlogistics.com/cms/article/2020-global-logistics-guide/
Airways
• During the month of may 2021, all Indian airports taken together
handled 74.73 thousand aircraft movements 4.46 million passengers
and 238.19 thousand tonnes of freight.
Source civil aviation ministry.
Role of Air Cargo in Indian Economy
The rate, pattern and structure of the growth of Indian economy have significant implications for the Air Cargo logistics Business in India as
these are highly interconnected.
• India’s Gross Domestic Product at constant prices has almost
quadrupled in the last two decades. From a slower average annual
growth rate of 5.6% in the 1990s to a moderately faster average
annual growth rate of 7.7% in the first decade of 2000, the growth
journey has excited many investors both in India and abroad. The
latter part of 2000s particularly in the period 2008-09 to 2010-11
recorded an average annual growth of 8.3%.
• Air Cargo growth rates in general are seen to be highly susceptible to
the fluctuations in the GDP growth rates of India more so in the
international Cargo segment. In fact the slowdown in cargo seems to
be preceding the slowdown of the economic growth in many cases.
That is why air cargo sector is known to be the barometer of the
economic health of a country.
Freight management
• Transportation Modes: Characteristics comparison
Characteristics Road Rail Water Air Pipeline

Speed 2 3 4 1 5

Investments 1 2 3 4 5

Cost 4 3 1 5 2

Frequency 2 3 4 5 1

capability 4 3 2 5 1
Factors Influencing Freight Cost
• Volume
• Distance
• Product Shape
• Product handling
• Product type ( fruits, ice-cream, pharmaceutical )
• Market Dynamics
Transportation Networks
• Point-to-point
network
• Multiple delivery points
network
• Trans-shipment
points
• Nodal Network
• Hub and Spoke
Network
Route Planning
• The main objective of route planning is to cover the distance between
two points with the shortest distance, ensuring operating economy
resulting into lowest transportation cost
What is this?
Logistics Packaging
Is Logistics Packaging different from normal packaging :
What is logistical packaging?
• The science, art and technology of enclosing or protecting products for
distribution, storage, sale, and use.
It also refers to the process of design, evaluation, and production of
packages.
Saghir (2002) suggests the following definition of Packaging Logistics:
“The process of planning, implementing and controlling the coordinated
Packaging system of preparing goods for safe, secure, efficient and effective
handling, transport, distribution, storage, retailing, consumption and
recovery, reuse or disposal and related information combined with
maximizing consumer value, sales and hence profit.”
Logistics Packaging
Here are a few reasons why packaging is so important in logistics:
1. Avoid Delays Due to Non-Compliance
2. Makes Transportation Easier
3. Protects Your Goods
4. Provides Important Information
5. Makes Storage More Convenient
6. Helps Sell Your Products
However it has its own pros and cons
Logistic Activity
Transportation
Increased package information
Increased product protection
Increased standardisation
Inventory
Increased product protection
Warehousing
Increased package information
Increased product protection
Increased standardisation
Communications
Increased package information
Trade-Offs
Decreases shipment delays; decreases tracking of lost shipments
Decreases damage and theft in transit, but increases package weight and
transport costs.
Decreases handling costs, vehicle waiting time for loading and unloading;
increases modal choices for shipper and decreases need for specialised transport
equipment
Decreased theft, damage, insurance; increases product availability (sales);
increases product value and carrying costs.
Decreases order filling time, labour cost.
Increases cube utilisation (stacking), but decreases cube utilisation by increasing
the size of the product dimensions.
Decreases material handling equipment costs.
Decreases other communications about the product such as telephone calls to
track down lost shipments.
Packaging Types
Packaging Type
Primary packaging, or Product Packaging which is in contact with the product. The packaging that the
packaging or consumer
packaging or sales packaging
Secondary packaging
Tertiary packaging
Group packaging
Transport packaging,
Industrial packaging, or
distribution packaging
Display packaging
Retail packaging
Used packaging
Definition
consumer usually takes home
Secondary packaging is designed to contain several primary packages
Used when a number of primary or secondary packages are assembled on a
pallet or roll container.
Packaging which is conceived to facilitate protection, display, handling and/or
transport of a number of primary packages
Packaging which is conceived to facilitate handling, transport and storage of a
number of primary packages in order to provide efficient production and
distribution as well as prevent physical handling and transport damage
Same as group packaging, quite often with an emphasis on display features
Same as group packaging with a special emphasis on the design to fit in retail
Packaging/packaging material remaining after the removal of the product it
contained
• For safe product handling, movement and storage
• During these days of cost optimization, every stage of physical
distribution has considerable significance. This significance gets
further augmented with variations in distribution channels, handling
methods, modes of transport, trans-shipments, storage conditions
and extremes of environment. As the distribution aspects of the
products are influenced by the above factors, the design of logistical
packaging should interface effectively with all the concerned
functional areas and ensure itself to adapt to material handling
system available.
• It provides optimum cubic capacity utilization of warehouse area and
carrier, convenience of inventory keeping and fulfils the basic need to
minimize the chance of product damage. Logistical packaging is
identified as an aid in the distribution network.
Distribution Integration
• Distribution management is the process used to oversee the
movement of goods from supplier to manufacturer to wholesaler or
retailer and finally to the end consumer. Numerous activities and
processes are involved, including raw good vendor management,
packaging, warehousing, inventory, supply chain, logistics.
Distribution Vs Logistics
• Logistics refers to the detailed
planning and processes involved
with the effective supply and
transportation of goods. Logistics
includes activities and processes
such as supply management, bulk
and shipping packaging,
temperature controls, security,
fleet management, delivery
routing, shipment tracking and
warehousing. It is perhaps easiest
to think of logistics as physical
distribution
• Distribution is a management
system within logistics that is
focused on order fulfilment
throughout distribution channels.
A distribution channel is the chain
of agents and entities that a
product or service moves through
on its way from its point of origin
to a consumer. Examples of
distribution channels include
ecommerce websites, wholesalers,
retailers and 3rd party or
independent distributors.
What is distribution network and its benefits
• A distribution network is a connected group of storage facilities and
transportation systems. It is formed in accordance with a distribution
strategy designed to move goods from manufacturer to wholesalers,
retailers or buyers.
• Besides delivering higher profits, distribution management eliminates
waste in a number of ways, ranging from reduced spoilage to reduced
warehousing costs since products and goods can be delivered as needed
(“just in time” inventory), rather than stored in bigger bulk (“just in case”
inventory).
• Distribution management leads to decreased shipping charges and faster
delivery to customers, and it also makes things easier for buyers as it
enables “one stop shopping” and other conveniences and rewards, such as
customer loyalty rewards programs.
Factors That Influence Distribution
Management
Many things can influence distribution management. The five most
common are:
1.Unit perishability – if it’s a perishable item then time is of the essence
to prevent loss,
2.Buyer purchasing habits – peaks and troughs in purchasing habits can
influence distribution patterns and therefore varying distribution
needs that can be predicted,
3.Buyer requirements — e.g. changes in a retailer’s or manufacturer’s
just in time inventory demands,
4. Product mix forecasting – optimal product mixes vary according to
seasons and weather or other factors and
5. Truckload optimization – relies on logistics and fleet management
software To ensure every truck is full to capacity and routed according
to the most efficient path.
Distribution Management Strategies
• At the strategic level, there are three distribution management
strategies:
1.Intensive Distribution or Mass.
The mass strategy aims to distribute to the mass market, e.g. to those who sell
to general consumers anywhere. Maximizing outlets to maximize sales. This is
good for mass products which have to reach maximum target audience and the
manufacturing is also high as compared to other normal goods.
E.g. Coca Cola
2 Selective Distribution:
The selective strategy aims to distribute to a select group of sellers, This
approach includes carefully choosing multiple channels and partners.

This is more hybrid approach and needs to be carefully formulated to make sure
that there is optimized distribution of the product/service.
e.g. only to certain types of manufacturers or retail sectors such as pharmacies,
hair salons, and high-end department stores

Example, Adidas, Nike

Distribution Management Strategies
• 3. Exclusive. The exclusive strategy aims to distribute to a highly
limited group. Exclusive stores to sell products leads to more control.
This can be good for niche, luxury or specialty goods
Example, Luis Vuitton Stores
Another example the manufacturers of Ford vehicles sell only to
authorized Ford dealerships, and producers of Gucci-brand goods only
sell to a narrow slice of luxury goods retailers.
Logistics Optimization using QT
• Refer to Transportation Problems in Decision Science.
THANK YOU