MANAGERIAL ECONOMICS

Section F
(Group #5)

Submitted By: - Submitted To: -

Aabhas Singhal (BD22060) Prof. Vishwa Ballabh
Amulya Singh (BD22069)
Saahil Khanna (BD22099)
Sanket Gupta (BD22079)
Utsav Verma (BD22116)
 TABLE OF CONTENTS

1. Introduction…………………………………………………………………………….3

2. Significance……………………………………………………………………………..4

3. Impact of Covid-19…………………………………………………………………..5

4. Case Study on DHL……………………………………………………………………7

5. Types of Logistics……………………………………………………………………..8

6. Bottlenecks………………………………………………………………………………9

7. Technological Innovations………………………………………………………10

8. Future prospects…………………………………………………………………….11

9. References……………………………………………………………………………..12

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Logistics Industry in India

The management of transportation for anything from raw materials to finished goods is part of the logistics sector.
Any commercial activity that involves the movement of tangible goods must include it. India's logistics industry
has problems because of its vast geographic footprint and second-largest population worldwide. It also performs
poorly in terms of efficiency compared to other BRICS nations. Among the BRICS nations, the average logistics cost
as a percentage of GDP was 11%; however, India's cost was 14%. An ineffective modal mix, particularly with the
road segment, might be blamed for the high logistics cost.
The Indian logistics market had an estimated value of $250 billion in the fiscal year 2021. In 2025, it was predicted
that this industry would reach 380 billion dollars with a 10- to 12-percent compound annual growth rate.
Compared to the BRICS average of 11 percent, India's logistics cost as a percentage of GDP is higher at 14 percent.

Freight movement by road transportation in India

Throughout India, road transportation moved freight at a rate of almost 2.7 trillion metric tons per kilometre in
the 2019 fiscal year. The freight flow has been steadily increasing over the period being discussed. In India, road
transportation dominates the logistics of freight.

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Air Freight Handled at Indian Airports
In the fiscal year 2021, 2.5 million metric tons of freight were moved to Indian airports. This was primarily
international freight. Nearly half of the nation's air freight was handled by three main airports: Indira Gandhi
International Airport in Delhi, Chhatrapati Shivaji International Airport in Mumbai, and Kempe Gowda
International Airport in Bengaluru.

Total Volume of Cargo Handled across Ports in India

India's ports handled more than 1.3 billion metric tons of cargo during the 2020 fiscal year. The freight handling
in Indian ports has steadily increased over the past ten years. In India, sea transport accounted for more than 95%
of trade volume and over 70% of commerce by value.

Significance of Logistics Industry in India

The logistics industry accounts for 14.4% of the Indian economy, a sizable share that is further expected to grow
at a Compound Annual Growth Rate (CAGR) of 15-20%. In addition to providing financial support for the nation,
the domain helps India become more globally competitive and visible compared to other nations. This industry
has always had a window to grow because most businesses in the country have manufacturing plants and

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warehouses outside of cities or in remote locations. The vertical, however, hasn't been able to realise its full
potential in the last few decades due to the poor quality of the transportation infrastructure.
• Obstacles in growth
The fact that this vertical is fragmented due to unorganised participants is one of the obstacles
hindering the sector's progress. Only 10% of the industry's overall market comprises organised
players. In contrast, unorganised players who run small-scale warehouses with little to no
mechanisation control around 90% of the nation's warehouse area. The absence of infrastructure
and a common platform for storage facilities and warehouses to communicate and work together
is another factor holding the country back. The ineffectiveness of the communication raises more
questions about how to handle the logistics.
• Future of the Industry
Some labels are moving ahead to develop unified systems to give a common platform for storage
while also enhancing internal working and communication procedures, upping the stakes for
competitors and putting India's logistic business on the world map. Every day, the rivalry gets
more vital, making it easier for evolution to emerge and success to seize the initiative. The logistics
industry appears to have a bright future, notwithstanding the current situation and the health
issue. Logistics is transforming the industry for the better and is poised to make history while
experiencing an upswing.

The impact of Covid-19 was felt in three major segments of Logistics:

1. Ocean freight: The total volume handled at ports worldwide dropped by more than 20% because of the
drastic decrease in demand for international goods during the initial duration of covid-19. In the other
half of the covid wave, ocean freight witnessed costs as high as 500% of the average due to a sudden
increase in demand for various goods.

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 2. Land freight: Land transit has typically continued to be broadly available worldwide as roads have
continued to be in use, except in nations under strict lockdowns. Trucking capacity was constrained by
increased demand for their services, particularly the transportation of food and medical supplies, along
with decreased personnel availability (because of COVID-19-related restrictions), which resulted in higher
prices. Lockdowns prevent other economic sectors that depend on land transportation, including industry,
from operating at total capacity.

3. Air freight: Air freight Volumes decreased by 19% during the peak time of Covid because of a steep
decline in passenger flights (which carry the load as belly cargo) and a decline in Chinese manufacturing.
However, air freight charges have grown, and some carriers are experiencing delays due to increased
traffic at airports as merchants and governments resort to air cargo for necessities. Capacity was raised,
and transit volume was recovered.

Post-Pandemic Logistics Sector

The COVID-19 epidemic has had two significant effects on the Indian logistics sector, both of which have a lasting
impact on the Indian economy. Demand forecasting, capacity planning, and product distribution across various
markets and regions will continue to be the industry's biggest challenges in the immediate term. As conventional
forecasting techniques have shown to be inefficient, ordering and maintaining the proper quantities of inventory
kept in warehouses has become more complex.

Additionally, the pandemic compelled the nation to restrict the flow of people and products, which resulted in the
usage of less-than-ideal routes and a lack of truck drivers. Undoubtedly, the pandemic showed the flaws and
inefficiencies of India's current logistics sector.

So far, the pandemic has had an impact on the logistics industry's two most important operations: warehousing
and transportation
• Warehousing
Even in prosperous times, managing the inventory kept in warehouses requires making exceptionally complex and
challenging decisions. Traditional forecasting methods are no longer helpful, making it more difficult to place
orders for and maintain adequate stock levels. Experienced buyers make decisions regarding raw materials, but
this experience may be less valuable in a drastically altered nation and global economy.

As we have seen, it is crucial now more than ever to choose the right combination of regional and central
warehouses for the COVID-19 period and beyond. To get it right, businesses must consider elements including
lead times for deliveries, the significance and frequency of demand, the material worth of goods, and the effects
of warehouse designs on capital and operating costs, as well as customer satisfaction. By utilising its access to
service-level agreements with customer-service units, warehousing can gain greater cooperation with materials
management. Transport functions can assist warehousing in mapping central and regional warehouses by giving
access to contracts with logistics service providers.

• Transportation
The usage of inefficient routes has increased because India is compelled under COVID-19 to restrict the
transportation of commodities between government-designated zones and states. In the meantime, a lack of

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drivers drove up the price of renting a vehicle by a startling 56 to 74 per cent. Because of these and other factors,
logistics operations may need to be flexible during and after the pandemic.

Last-mile deliveries are becoming increasingly significant for e-commerce, but COVID-19 has heightened this
trend. Shoppers have increased significantly online, especially for food globally and undoubtedly in India. While
their operational capacity decreased by half last year, demand for India's online food shopping portals increased
by up to 80%. The long-term issue is that last-mile logistics rely on unorganised, tiny trucking companies that lack
the resources and sophistication to employ contemporary techniques.

A case study on How DHL (Logistic company) dealt with Covid-19

When trade started to decline in March 2020, DHL management took the help of institutional memory, good client
relations, and firm predictions to manage the situation. The company employees were familiar with how supply
networks bounced back after previous hiccups, like the volcanic ash cloud that enveloped Europe in 2010 and the
earthquake and tsunami that struck Japan in 2011. Executives also carefully studied the variety of available
business predictions and how consumers in particular industries anticipated needing more rather than fewer
services from the organisation.

DHL Express was forced to reorganise its operations as the pandemic progressed to respond to changes no
network planner could have anticipated, like a sudden increase in PPE flows to China and then even larger volumes
being shipped in the opposite direction quickly, followed by an unprecedented cross-border e-commerce boom.
DHL's global network handled more requests to alter aeroplane movements in just one week in May 2020 than in
the previous year.

Long before the pandemic, the essential elements that enabled major modifications were already in place. There
were programs installed that trained employees for demanding situations like covid already. For instance, the
"Certified International Specialist" program at DHL Express, launched in 2010 with a €100 million investment,
combines training and culture-building with employee engagement. This contradicts the widespread belief that
size and asset intensity are related to inertia. However, DHL and other multinational companies benefited from
the scale reached in this epidemic, promoting greater resilience. DHL's extensive global network and range of
industry specialities allowed it to adapt to rapidly shifting trade flows and to help with the rise in e-commerce.

Direct control of assets still has a role to play in enhancing resilience, despite new technologies being the driving
force behind the expansion of asset-light solutions. The collapse of international air travel during the pandemic
has been a significant problem for logistics organisations. There was a severe shortage of air freight capacity
because of grounded passenger planes, which typically carry freight in their belly. This eliminated up to 50% of
the market's air cargo capacity on several essential trade corridors. Due to DHL's management of a fleet of more
than 250 aeroplanes and operational adjustments, including speedy turnarounds to prevent quarantining pilots,
this disruption had a much less effect on the business and its clients. The size of the aircraft assets also allowed
DHL Express to continue operating in more than 220 countries.

The sharp increase in global trade and DHL's experience with the COVID-19 pandemic highlights the necessity of
not overreacting to changing trade forecasts, treating investments in people as essential components of resilience,
and utilising corporate reach and control of assets to move more quickly. Businesses and nations will continue to
rely on international and regional supply chains as long as commerce is active.

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Types of Logistics

Inbound Logistics
Inbound logistics is the transportation, storage, and receipt of incoming resources (such as raw materials or other
items) needed to make a product. Furthermore, it could be the delivery of things from your inventory. The below
diagram shows the placement of inbound & outbound logistics in an organisation.
For instance, if your business deals in shoes, your inbound logistics will include the rubber for your boots, the
fabric for knitting the shoes, etc.

Outbound Logistics
Outbound logistics involves getting the product to the client on schedule. Their main goal is to ensure that the
product reaches the client securely and at the lowest possible cost.
For example, if you sell shoes, sandals, slippers, and so on, your outbound logistics will be the delivery of the
finished product to your clients.

Reverse Logistics
Reverse logistics refers to the moving of goods from the buyer to the vendor. It comprises the gathering,
examination, sorting, and distribution of refurbished androids.
You have undoubtedly encountered a situation where you ordered a product online that did not meet your needs
at least once. A replacement or refund request for the product is then issued.
The company picks up that product from your address. Reverse logistics is the method used to get the product
from your side to the company.

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Third-Party Logistics (3PL)
Third-party logistics are solely concerned with transporting things from one end to the other.
It doesn't matter if the transaction is between a consumer and a seller. They accept responsibility for getting the
products to the correct destinations at the appropriate time.
Instead of spending time monitoring the delivery services, it enables firms to concentrate on their core
competencies.

Bottlenecks
A bottleneck is a congested area in a production system (such as an assembly line or computer network) that
causes the system to stop or move very slowly. Inefficiencies caused by the bottleneck frequently cause delays
and higher manufacturing costs.
Long-term and short-term bottlenecks are the two basic categories.
A short-team bottleneck is produced by temporary situations such as personnel on vacation or sick leave.
Long-term constraints, such as inefficient machinery, are baked into the production process.

How to Improve bottlenecks

Increase the Efficiency of the Bottleneck Step

First, be sure that whatever you feed into the bottleneck is free of flaws. This prevents wasting time on useless
material or on having to repeat the process.
Put your most talented team members in charge of the bottleneck. Also, look for solutions to increase the
bottleneck's capacity. Finally, consider automating the process.

Decrease Input into the Bottleneck Step

If one portion of a process has the potential to produce more output than you ultimately require, decreasing input
is a sensible solution.
Reallocating work to areas with additional capacity could be an alternative strategy for reducing input.

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Technological Innovation in the Logistics Sector

AI significantly impacts logistics, from last-mile delivery robots and sustainability

Artificial and
solutions to warehouse automated picking systems and predictive optimisation tools.
Augmented
These advances in logistics technology are expected to continue in 2022, with benefits
Intelligence
for shippers, carriers, suppliers, and customers.
Digital twins are virtual replicas of physical devices like assets, systems, or processes that
data scientists and IT personnel can use to run simulations. Digital twins are intended to
provide corporate value by detecting and preventing issues, forecasting performance,
Digital Twins
and optimising operations using real-time data. Additionally, warehouses and other
facilities can employ technology to build precise 3D models of their facilities, test new
equipment or layout changes without risk, test out various scenarios, and improve
efficiency.
By enabling businesses to leverage real-time data, emerging supply chain visibility firms
Real-Time
offer technology that encourages swift response to change. These data include traffic
Supply Chain
patterns, weather information, and road and port conditions to optimise routes,
Visibility
restructure demand, and reroute supply. According to recent reports, logistics firms that
entirely use integrated supply chains are 20% more efficient than those that do not.
1. Inventory Tracking - Blockchain technology can create a productive system that
enables various businesses to track their items down to the micron level.
2. Improve Freight and Shipping – An organisation can trace every item with the help of
technology, which will also simplify the current logistics procedure.
Blockchain 3. Invoicing and Payments - Creating effective and secure systems for invoicing and
payments is a significant challenge in logistics. With the advent of cryptocurrencies like
Bitcoin and Ethereum, blockchain has already demonstrated its efficiency in handling
transactions.
4. Improving Transparency - The reliability of information is a significant problem for
supply chains, and provenance is a business leveraging blockchain to address it.
1. Reduced Shipping & Operational Costs
2. Delivery at the Speed of Click - No human involvement after a package leaves the
Drones warehouse.
3. Eliminate Return Hassles - Drones address the annoyance of needing to go to the post
office and drop off your parcel and the potential for lowering return time cycles.

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Future prospective of logistics and Initiatives by the Government of India
The logistics sector in India is expected to see strong growth in 2022, supported by government reforms,
transportation sector development plans, rising retail sales, and the e-commerce sector. Given the requirement
for minimal entry barriers and less capital investment compared to setting up an asset-based business model,
online freight platforms and aggregators have grown in popularity in the Indian logistics sector.

By 2025, manufacturing in India has the potential to contribute up to 25%–30% of its GDP, which will fuel the
country's warehousing market's expansion. India's logistics industry is anticipated to expand between 2019 and
2025 at a CAGR of 10.5%. The growth of the logistics business is expected to be supported by e-commerce, another
significant segment, over the projection period. Rising investments and trade suggest an optimistic future for the
Indian freight sector.

By 2022, port capacity is anticipated to increase by 275 to 325 MT at a CAGR of 5% to 6%. By 2030, Indian Railways
wants to have 3.3 billion tons of freight traffic, up from 1.1 billion tons in 2017. India's airports can handle 17
million tons of freight by FY 2040. However, to compete with its international counterparts, the Indian air cargo
business needs to step up in a few key areas, including the lack of supporting infrastructure, automated material
handling systems, skilled labour, poor technology adoption, and a significant reliance on human operations.

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References

https://www.statista.com/topics/8985/logistics-industry-in-india/#dossierKeyfigures

https://www.statista.com/statistics/1286496/india-size-of-road-logistics-market/

https://www.statista.com/statistics/667440/road-transport-freight-india/

https://www.statista.com/statistics/588135/freight-traffic-by-type-indian-airports/

https://www.dqindia.com/technological-advancement-importance-evolution-logistics-market-india/

https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/indias-postpandemic-
logistics-sector-the-need-for-technological-change

https://hbr.org/2021/05/how-dhl-express-navigated-the-pause-and-rebound-of-global-trade

https://c3.ai/glossary/artificial-intelligence/digital-twin/

https://hbr.org/2020/05/building-a-transparent-supply-chain

https://www.ennomotive.com/blockchain-applications-in-logistics/

https://www.embention.com/news/advantageous-of-drones-in-logistics-sector/

https://articles.cyzerg.com/how-drones-will-affect-the-logistics-industry-in-the-next-5-years/

https://economictimes.indiatimes.com/industry/csr/initiatives/growth-and-innovation-in-the-logistics-
sector/articleshow/81930713.cms?from=mdr

https://lapaas.com/logistics-management-overview-types-and-process/

https://www.mindtools.com/pages/article/newTMC_76.htm

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