Chapter IV

Profile of Logistics
Company

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 CHAPTER - IV

PROFILE OF LOGISTICS SECTOR: CHALLENGES AND ISSUES

INTRODUCTION

In Indian manufacturing and retailing industry, logistics is one of the biggest

requirement service which leads to success. Consumer beliefs and needs have altered based
on the trend, the logistics fulfils such expectations. Not only in the field of manufacturing
even Evolution of Logistics in Supply Chain Management or the purpose of holding raw
materials, processing it as finished goods and selling process. Even in the service sector, the
logistics plays a vital role. With suitable logistics, products should be of a better
presentational superiority, could possibly be cheaper and have longer shelf life.

Indian logistics industry has been experiencing a faster growth rate in logistics sector.
The scope of logistics process i.e. between the point of origin and the point of consumption is
the conceptualized as covering a firm’s suppliers and its customers of SCM. Especially the
online marketing created a new era for logistics sector. Example Amazon, Snap deal, Flipkart
etc. Logistics is a “process of planning, implementing, and controlling the efficient, effective
flow and storage of goods, services, and related information from point of origin to point of
consumption for the purpose of conforming to customer requirements.” Logistics
Management must balance 2 basic targets:

 Quality of service

 Low cost

Logistics typically refers to activities that occur within the boundaries of a single
organization and supply chains refer to networks of companies that work together and
coordinate their actions to deliver a product to market. Also, traditional logistics focuses its
attention on activities such as procurement, distribution, maintenance, and inventory
management.

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Logistics Management:

The study has undergone with the following logistics companies:

 Maersk Line.
 TVS Logistics.
 TLPL.
 Seaway Shipping.
 Pan Asia Logistics.

As the above companies are has occupied the top most position in the global market.
It was taken for the research study to analyze the logistics in India.

Maersk Line: It is an integrated transport and logistics company with multiple brands and it
is a global leader in container shipping and ports. It is a standalone energy division. Maersk
Line operates over 600 vessels and has a capacity of 2.6 million.

TVS Logistics: TVS Logistics is one of the leading warehouse operations. TVS global
freight services offers complete logistics solutions and specialists in Warehousing,
Distribution, Transportation, In plant logistics support for automobile OEMs, auto parts
suppliers and buyers. It has turnover of nearly US $ 7 billion. It is a part of TVS Group. They
had made their organization with Quality Policy in logistics sector.

TLPL Shipping and Logistics Ltd: TLPL was established with the aim of combining the
group strengths and years of experience in the shipping field to provide a single platform to
cater to all our customer’s needs. TLPL does international freight services forwarding by sea
& Air. They also own MTD/CTD bill of lading, duly insured by A.T.L.A.S., London, UK.

They do have tracking and tracing of cargo services for their logistics and e-customs
documentation.

SEAWAY: seaway is the logistics and shipping company which was running its industry
with 26 years of experience without failure. They have 45 offices across the world and have
30 locations in india. They have strategic partners in 95 countries. They offer logistics,
shipping, Ports and terminals and FTWZ (F T W Z). They provide duty free storage upto 5
years. They will go through customs clearance and value added services.

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 Seaways Group provides NVOCC services under Maxicon brand. We are a well-
established NVOCC player in South East Asia and Middle East offering shipping services for
full container loads and special equipment. Headquartered in Singapore, Maxicon Container
Line handled more than 135,000 Throughput TEUs in FY15, has an asset base of more than
16,000 containers (with own repair yards) and serves about 73 locations with focus on busy
trade lanes in Middle East, South East Asia and the Indian Subcontinent.

Seaway follows three steps to fulfill their future vision as they provide improved lead
times, enhanced service levels and reduced costs.

PAN Asia Logistics Pvt Ltd:

Pan Asia was specialized in their logistics operations, their motto is to become a
reliable partner of our trade, offer most cost effective, transparent, reliable and prompt
services coupled with innovative technology to have customer satisfaction beyond
boundaries.

In a distribution system, four interrelated activities affect customer service and cost of
providing it:

 Transportation,

 Distribution inventory,

 Warehouses (distribution centres), and

 Order processing.

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 Figure 4.1
1

Logisttics Manag
gement

(Sourcce: nhbschool.com)

The transportation proocess in efffect starts when and where carrriers take goods
g in
charge and finishees when andd where gooods are deliivered to coonsignees. IIn the case of IMT,
the trannsportation process
p inclludes the following speecific activitties:

a) Receiving goods
g from consignorss;
b) Issuing the IMT docum
ment;
c) Warehousinng or storinng goods whhile waiting for transpoortation (if nnecessary);
d) Loading off goods ontoo the means of transporrt;
e) Transportinng goods to destinationns;
f) Transferrinng goods bettween meanns of transpo
ort;
g) Unloading goods;

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 h) Warehousing or storing goods while waiting for delivery (if necessary).
i) Delivering goods to the consignee upon presentation of an eligible IMT document.

Evolution of Logistics System in SCM(Supply Chain Management):

The word “logistics” is derived from the Greek adjective logistikos meaning “skilled
in calculating.” The first administrative use of the word was in Roman and Byzantine times
when there was a military administrative official with the title Logista. The evolution of
logistics management started in early 1960s.

Figure 4.2

Evolution of Logistics System in SCM

(Source: LSCM by Dr. BhushanSudhakar& Dr. Clement Sudhakar from

Pondicherry University)

Early 1960s:

The early 1960s started logistics with a period called as "fragmentation period" of the
logistics during this period the logistics management was carried over with demand
forecasting, purchasing, requirements planning, production planning, manufacturing

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inventory, warehousing, material handling, packaging, inventory, distribution planning, order
processing, transportation and customer service.

Early 1980s:

This period is considered as "Consolidation Period". During this period the process
was shortlengthed with Materials management and the manufacturing process was
consolidated with warehousing, materials handling and packaging. Thus the physical
distribution was carried over at the end.

Early 1990s:

For a decade period, early 1990s was called up with "Functional Integration". The
period time was functionally integrated with logistics and all the traditional process was done
under the logistics process.

Early 2000s:

During this period, the SCM (Supply Chain Management) was considered as value
capture time. in this SCM, the Information Technology, Marketing and Strategic planning
plays an vital role with the planning of logistics in a systematic way.

Types of Logistics:

1. Return Logistics (Reverse Logistics):

In order to increase the sales as well as the market share, many companies advertise
that their goods will perform well over a period of time. The customer is, therefore, led to
believe that in case he buys the product of that company, he is assured of satisfactory
performance of the product. But at the same time, it is very much obvious that the company
cannot assure the satisfactory performance of each and every of its product which is sold in
the market. Few of the products sold may not perform as advertised over the specific period
of time. Such products need to be brought back by the company to confirm good customer
service. Multination Companies (MNCs) to protect their market image and to stall its
competitors from grabbing its customers, recall immediately the defective or substandard
product from the market. Product recall is a critical competency resulting from increasingly
rigid quality standards product expiration dating responsibility for hazardous consequences.

The company has, therefore, to take into account the defective goods that would be
eturned while framing the total logistical system network and calculating the total cost of
such a system of network. Incorporating the goods returned in the total logistical systems
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network and cost is called as Return Logistics. Return Logistics requirement’ also result from
the increasing number of laws prohibiting random scrapping and disposal on one hand, while
encouraging recycling of waste such as beverage containers, packaging materials, etc. The
most significant aspect of return logistical operation is the need for maximum control when a
potential health liability exists.

2. Military Logistics

Military logistics is the art and science of planning and carrying out the movement
and maintenance of military forces. In its most comprehensive sense, it is those aspects or
military operations that deal with: Design, development, acquisition, storage, distribution,
maintenance, evacuation, and disposition of material, evacuation, and hospitalization of
personnel, acquisition or construction, maintenance, operation, and disposition of facilities.

3. Third Party Logistics (3PL)

3PL, Third Party Logistics describes businesses that provide one or many of a variety
of logistics related services. Types of services would include public warehousing, contract
warehousing, transportation management, distribution management, freight consolidation. A
3PL provider may take over all receiving, storage, value added, shipping, and transportation
responsibilities for a client and conduct them in the 3PL’s warehouse using the 3PLs
equipment and employees or may manage one or all of these functions in the clients facility
using the clients equipment, or anything combination of the above. 3PL can be defined as the
“Business of proposing physical distribution reforms to a client and undertaking
comprehensive physical distribution services.” Third party logistics (3PL), a new business
model for physical distribution, originated in the U.K. & became highly popular in U.S. in
the 1990s. 3PL providers offer innovative alternatives to clients in the form of comprehensive
logistics services. Because 3PL requires that providers have intimate access to the corporate
strategy of their clients, relationships are based long term contracts as a rule. The growing
demand for 3PL can be attributed to both demand, & supply side factors.

(1) faced with deregulation & growing competition, transport companies are seeking new
business opportunities, &

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(2) Clients are seeking to outsource their logistics operations cut costs & focus management
resources on core businesses.

Figure 4.3
(Source: Monica Alfredsson (February 2003))
Third Party Logistics (3PL)
4. Fourth Party Logistics:

Traditionally, suppliers and big corporations have been meeting the demands by
increased inventory, speedier transportation solutions posting on-site service Traditionally,
suppliers and big corporations have been meeting the demands by increased inventory,
speedier transportation solutions posting on-site service engineers and many times employing
a third party service provider. Today they need to meet increased levels of services due to e-
procurement, complete supply visibility, virtual inventory management and requisite
integrating technology. Now corporations are outsourcing their entire set of supply chain
process from a single design, make and run integrated comprehensive supply chain solutions.
This evolution in supply chain outsourcing is called Fourth Party Logistics – the aim being to
provide maximum overall benefit. Thus a fourth party logistics provider is a supply chain
integrator that assembles and manages the resources, capabilities and technology of its own
organization with those of complementary service provider to deliver a comprehensive
supply chain solution. It leverages the competencies of third party logistics providers and
business process managers to deliver a supply chain solution through a centralized point of

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contact. As the fourth party logistics provider caters to multiple clients, the investment is
spread across clients-thus taking the advantage of economies of scale.

Figure 4.4

Evolution of the market

(Source: Frost & Sullivan)

Cost Effectiveness of Fourth Party Logistics: Revenue growth by enhanced product

quality, product availability, and improved customer service -all facilitated by the application
of leading technology. Operating cost reduction can be achieved through operational
efficiencies, process enhancements and procurements. Savings will be achieved by complete
outsourcing of supply chain functions and not just selected components. Fixed capital
reductions will result from capital asset transfer and enhanced asset utilization. The fourth
party logistics organization will own physical assets through freeing up the client
organization to invest in core competencies.

5. Inbound Logistics:

Creation of value in a conversion process heavily depends on availability of inputs on

time. Making available these inputs on time at point of use at minimum cost is the essence of
Inbound Logistics. All the activities of a procurement performance cycle come under the
scope of Inbound Logistics. The main Scope of Inbound Logistics covers transportation
during procurement operation, storage, handling if any and overall management of inventory

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of inputs. Several activities or tasks are required to facilitate an orderly flow of materials,
parts or finished inventory into a Manufacturing complex. They are sourcing, order
placement and expediting, transportation, receiving and storage. Overall, procurement
operations are called inbound logistics. Inbound logistics have potential avenues for reducing
systems costs. Delivery time, size of shipment, method of transport & value of products
involved are different from those of physical distribution cycles. Normally delivery is large
as a low cost transportation mode is chosen. As the value of inventory is low, size of
shipment is large & transit inventory costs are low.

6. Outbound Logistics:

Figure 4.5

(Source: https://lisbonstockexchangebar.wordpress.com/2014/06/10/key-activities/)

Value added goods are to be made available in the market for customers to perceive
value. Finished goods are to be distributed through the network of warehouses and supply
lines to reach the consumer through retailers’ shops in the market. During conversion value is
added to the raw materials and as a result value of the inventory in this case is very high
unlike inputs. Now the size of shipment, modes, of transport and delivery time are different
as compared to inputs. Activities of shipment, distribution performance cycle come under the

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scope of
o Outbounnd Logistics. They arre order maanagement, transportaation, wareh
housing,
packagiing, handlinng etc.

Emergencee of fourth party logistics is a neew concept in supply chain outso

ourcing.
With thhe rapid advvancements of technologies, it wiill be easierr to reap thee benefits of
o fourth
party loogistics conccept. Thus fourth
f partyy logistics iss the future of supply chhain manag
gement.

Figure 4.6
6

(Source: htttps://snsikcchi.wordpreess.com/2017/01/25/wm
ms-outboundd-logistics/))

Historyy and Advaancement of

o Logistics

Logistics was
w initiallly a militaary activity
y concerneed with geetting soldiers and
munitioons to the battlefront
b i time for flight, but it is now seen
in s as an iintegral parrt of the
modernn productionn process. The
T main baackground of
o its develoopment is thhat the receession of
Americca in the 19950s causedd the industtrial to placce importannce on goodds circulatio
ons. The
term, loogistics, wass initially developed inn the contex
xt of militaryy activities in the late 18th
1 and
early 199th centuriees and it launnched from
m the militarry logistics of
o World W
War II. The probable
p

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origin of the term is the Greek logistikos, meaning ‘skilled in calculating’. (BTRE, 2001)
Military definitions typically incorporate the supply, movement and quartering of troops in a
set. And now, a number of researches were taken and made logistics applications from
military activities to business activities.

Business logistics was not an academic subject until the 1960s. A key element of
logistics, the trade-off between transport and inventory costs, was formally recognized in
economics at least as early as the mid-1880s. (BTRE, 2001) Based on the American
experience, the development of logistics could be divided into four periods (Chang, 1998),
which are represented as follows:

Logistics historical development

Figure 4.7

(Source: chang 1998)

Before the 1950s, logistics was under the dormant condition. Production was the main
part of the managers concerned, and industry logistics was once regarded as “necessary evil”
in this period. During the 1950s to and 1960s, applying new ideas of administration on
business was a tendency. In 1956 on the role of air transportation in physical distribution was
the application of “total cost concept” and it pointed out the notions of trade-off between
inventory and transportation. From the 1970s onwards, more and more applications and
researches of logistics appeared. Due to petroleum price rise in 1973, the effects of logistics
activities on enterprises grew. Slow growth of market, pressure of high stagflation, release of
transportation control, and competitions of the third world on products and materials all
increased the significance of logistics system on planning and business at that time. The
further tendency of logistics in the early 21st century is logistics alliance, Third Party

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Logistics (TPL) and globalised logistics. Logistics circulation is an essential of business
activities and sustaining competitiveness, however, to conduct and manage a large company
is cost consuming and not economic. Therefore, alliance of international industries could
save working costs and cooperation with TPL could specialize in logistics area.

Scope of the Logistics in business:

Logistics management tries to have the right product in the right quantity, at the right
place and at the right time, with the right cost. Logistics in a business mainly aims in few
contributions as:

 Achieve maximum customer service level

 Ensure high product quality

 Achieve minimum cost

 Be flexible in the constant market changes

 Achieve maximum customer service level:

Customers are so much demanding, not only in the quality aspect but also with regard
to the service aspect. Customers form a few perceptions in relation to the various aspects of
customer service like reliability, competency, responsiveness, trustworthiness etc. With the
help of these cues, customers evaluate the firm’s services and conclude whether they are
satisfied or not. Physical distribution plays a major role in delivering customer service.

 Ensure high product quality:

Well-supplied health programs can provide superior service, while poorly supplied
programs cannot. Likewise, well-supplied health workers can use their training and expertise
fully, directly improving the quality of care for clients. Customers are not the only ones who
benefit from the consistent availability of commodities. An effective logistics system helps
provide adequate, appropriate supplies to health providers, increasing their professional
satisfaction, motivation, and morale. Motivated staff are more likely to deliver a higher
quality of service.

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 Achieve minimum cost:

An effective supply chain contributes to improved cost effectiveness in all parts of a

program, and it can stretch limited resources. Strengthening and maintaining the logistics
system is an investment that pays off in three ways.

(1) It reduces losses due to overstock, waste, expiry, damage, pilferage, and inefficiency;
(2) It protects other major program investments; and
(3) It maximizes the potential for cost recovery.
 Be flexible in the constant market changes:

It is the creation of a service platform to serve the customer, so as to build up

credibility in the market and create a good image amongst the existing and prospective
customers. In other words, this refers to those elements, which determine the capability of
service before they are provided. Pre transaction elements are usually relate to corporate
policies or programs, written statements of service policy, adequacy of organizational
structure and system flexibility.

Objectives of Logistics Management:

The logistics management intends in performing the transportation aspects of a

business. The process of supply chain management will act as a part in Logistics
Management. The main objectives of Logistics Management in running the business are as
follows:

 Reduction of inventory: Inventory is one of the key factors, which can affect the
profit of an enterprise to a great extent. In the traditional system, firms had to carry lot
of inventory for satisfying the customer and to ensure excellent customer service. But,
when funds are blocked in inventory, they cannot be used for other productive
purposes. These costs will drain the enterprise’s profit. Logistics helps in maintaining
inventory at the lowest level, and thus achieving the customer goal. This is done
through small, but frequent supplies.

 Economy of freight: Freight is a major source of cost in logistics. This can be

reduced by following measures like selecting the proper mode of transport,
consolidation of freight, route planning, long distance shipments etc.

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  Reliability and consistency in delivery performance: Material required by the
customer must be delivered on time, not ahead of the schedule or behind the schedule.
Proper planning of the transportation modes, with availability of inventory will ensure
this.

 Minimum damage to products: Sometimes products may be damaged due to

improper packing, frequent handling of consignment, and other reasons. This damage
adds to the logistics cost. The use of proper logistical packaging, mechanized material
handling equipment, etc will reduce this damage.

 Quicker and faster response: A firm must have the capability to extend service to
the customer in the shortest time frame. By utilizing the latest technologies in
processing information and communication will improve the decision making, and
thus enable the enterprise to be flexible enough so that the firm can fulfill customer
requirements, in the shortest possible time frame.

Logistics Cycle: Organizing Logistics System Activities

Logistics management includes a number of activities that support the six rights. Over
the years, logisticians have developed a model to illustrate the relationship between the
activities in a logistics system; they call it the logistics cycle.

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 Figure 4.8

Logistics Cycle

(Source: https://in.pinterest.com/pin/292100725812780976/?lp=true)

The activities in the center of the logistics cycle represent the management support
functions that inform and impact the other elements around the logistics cycle.

In the next few sections, you will look briefly at all the elements shown in the
logistics cycle, including the

 major activities in the cycle

 heart of the logistics cycle
 quality monitoring of the activities
 Logistics environment-policies and adaptability of the system.

Major activities in the logistics cycle

The major activities in the logistics cycle:

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 Serving Customers: Everyone who works in logistics must remember that they
select, procure, store, or distribute products to meet customer needs. Storekeepers do
not store drugs just for the purpose of storing; they store products to ensure that
commodity security exists for every customer to obtain and use the health
commodities when they need them. In addition to serving the needs of the end
customer-the customer seeking health services-each person in the process is also
serving the needs of more immediate customers. Storekeepers provide customer
service when they issue medicines to the health facility, and the central medical
stores provide customer service when they issue commodities to the district. The
logistics system ensures customer service by fulfilling the six rights. Each activity in
the logistics cycle, therefore, contributes to excellent customer service and to
ensuring commodity security.

 Product Selection: In any health logistics system, health programs must select
products. In a health logistics system, a national formulary and therapeutics
committee, pharmaceutical board, board of physicians, or other government-
appointed group may be responsible for product selection. Most countries have
developed essential medicine lists patterned on the World Health Organization
(WHO) Model List. Products selected for use will impact the logistics system, so the
logistics requirements must be considered during the product selection.

 Quantification: After products have been selected, the required quantity and cost of
each product must be determined. Quantification is the process of estimating the
quantity and cost of the products required for a specific health program (or service),
and, to ensure an uninterrupted supply for the program, determining when the
products should be procured and distributed. See the suggested reading list at the end
of the handbook for sources of additional information about quantification of health
commodities.

 Procurement: After a supply plan has been developed as part of the quantification
process, quantities of products must be procured. Health systems or programs can
procure from international, regional, or local sources of supply; or they can use a
procurement agent for this logistics activity. In any case, procurement should follow
a set of specific procedures that ensure an open and transparent process that supports
the six rights.
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  Inventory Management- Storage and Distribution: After an item has been
procured and received by the health system or program, it must be transported to the
service delivery level where the client will receive the products. During this process,
the products must be stored until they are sent to the next lower level, or until the
customer needs them. Almost all businesses store a quantity of stock for future
customer needs.

Other activities at the heart of the logistics cycle

Other activities help drive or support the logistics cycle; they are the heart of a
well-functioning logistics system. These activities include:

 Organization and Staffing: A logistics system can only work if well-trained,

efficient staff monitor stock levels, place orders, and provide products to clients.
Health programs assign the appropriate resources to staff (for example, supervision
authority and technical knowledge) to complete logistics activities. In fact, some
countries have established national logistics management units that analyze logistics
data and provide feedback throughout the system. Organization and staffing,
therefore, are important parts of the cycle. For a logistics system to work correctly,
logistics staff must make the six rights a top priority.

 Budget: Allocation and management of finances directly affect all parts of the
logistics cycle, including the quantities of products that can be procured, the amount
of storage space that may be available, the number of vehicles that can be
maintained, and the number of staff working in logistics. Mobilizing resources and
securing a budget line item for health commodities and logistics activities is
extremely important to ensure that products are available and that the logistics
system operates effectively. To determine the resources needed to scale up, supply
chain managers first need to assess what the expected costs are at different levels of
the logistics system. When determining supply chains costs, managers should
consider the cost of storage, transportation, and management; and determine what
share of these costs each group will cover (i.e., Ministry of Health, donors,
nongovernmental organizations [NGOs], etc.).

 Supervision: Supervising the staff who work within the logistics system keeps it
running smoothly and helps to anticipate needed changes. Routine, effective
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 supervision, coupled with on-the-job training in logistics, helps to both prevent and
resolve supply problems and human resource constraints.

 Monitoring and Evaluation: Routine monitoring and periodic evaluation of the

pipeline and logistics system activities help demonstrate how well the system is
performing, the areas that can be improved, as well as the system’s impact on service
provision.

Quality monitoring

It is important to understand the role of quality monitoring in ensuring an efficient

and effective logistics system. In the logistics cycle, notice how quality monitoring appears
between each activity of the logistics cycle. Quality monitoring refers not only to the quality
of the product, but also to the quality of the work. Quality monitoring appears four times in
the logistics cycle:

 Between Product Selection and Quantification & Procurement: Quality

monitoring plays an important role in quantifying and procuring the right products,
based on the appropriate product selection and use. Products that are quantified
should be on the national essential medicines list (EML), be approved and registered
for use in the country, and be included in appropriate standard treatment guidelines
(STGs). Also, service providers must be trained to correctly use the products before
they are procured and distributed to facilities.

 Between Quantification & Procurement and Inventory Management:

Procurement decisions should be based on the supply plan that is developed during
quantification. To ensure product quality, procurement documents must include
detailed product and packaging specifications, and the expectations for quality at the
time of receipt. After procurement, program managers must check the quality of
health commodities before they enter the distribution system. Products that are
procured should be quickly cleared through customs, or other inspections, before
being distributed to facilities.

 Between Inventory Management and Serving Customers: While products are

received, stored, and distributed (and when customers receive them), it is important to
monitor their quality. Furthermore, the quality of the storage conditions and

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 transportation mechanisms should be monitored. The inventory control system must
be designed so that, if followed, customers will receive the products they need, at the
time they need them.

 Between Serving Customers and Product Selection: Even after customers receive
the products, the program must continue to monitor the quality. Programs must
determine if customers are satisfied with the quality of the products and whether the
customers are satisfied with the service they received. Health workers must adhere to
standard treatment guidelines when serving clients; they must also conduct
pharmacovigilance. Quality monitoring of both the product and the service is critical
to the success of efforts to promote the appropriate use of products. Customers should
correctly use the products they receive and be satisfied with them and with the service
they received. The results of monitoring customer satisfaction can be used to inform
decision makers about changes in product selection and use for the next procurement
cycle. Remember, serving customers is at the top of the logistics cycle and that means
getting the right goods to those customers.

Quality monitoring is discussed in more detail throughout this handbook. To satisfy

the six rights and ensure you receive the right goods-in the right condition-to customers, you
need to institute quality assurance mechanisms throughout the supply chain.

Functions of Logistics Management:

The various functions of logistics are as follows:

1. Order Processing: Processing the orders received from the customers is an activity,
which is very important by itself and also consumes a lot of time and paperwork. It
involves steps like checking the order for any deviations in the agreed or negotiated
terms, price, and payment and delivery terms, checking if the materials is available in
stock, to the owner, by indicating any deviations.

2. Inventory Planning and management: Planning the inventory can help an

organization in maintaining an optimal level of inventory which will also help in
satisfying the customer. Activities like inventory forecasting, engineering the order
quantity, optimization the level of service, proper deployment of inventory etc. are
involved in this.

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 3. Warehousing: This serves as the place where the finished goods are stored before
they are sold to the customers finally. This is a major cost center and improper
warehouse management will create a host of problems.

4. Transportation: Helps in physical movement of the goods to the customers place.

This is done through various modes like rail, road, air, sea etc.

5. Packaging: A critical element in the physical distribution of the product, which also
influences the efficiency of the logistical system.

Logistics delivers value to the customer through three main phases:

a. Inbound logistics

b. Process logistics

c. Outbound logistics

Figure 4.9

(Source: Kwame Owusu Kwateng(2014))

Logistics Phases

Business Logistics:

It includes Inventory Management, Purchasing, Transportation, and Warehousing

Strategic Logistic Planning:

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 Business firms have been forced to reengineer or redefine their business process so that
efficiency and effectiveness can be brought into the operations. The main reason for this has
been the increasing globalization of business activities, intense competition, and uncertain
markets. Different firms have different process of strategy formulation and implementation.
The process of strategic logistics planning has the following steps:

 Analyzing the external and internal environment, which will help to determine the
resource requirements, limitations and any other factors.

 The environmental analysis identifies the company’s strengths, weaknesses,

opportunities and threats in customer service.

 SWOT enables in formulating the appropriate resources and the logistics mix or
resources required for achievement of organizational goals.

 A structural design is needed to implement the strategy. The primary concern here is
the strategic planning of warehouses; transportation and information flow in the entire
supply chain. A proper interface between channel structure of the firm and its
logistical network can be done with the help of a structural design. The efficiency of
the functional elements in the movement of information and inventory across the
supply chain will influence the success of the strategy implementation.

 Selection of transportation route, mode and carrier operator is a key aspect for
offering and maintaining a reliable and consistent service level.

 The role of material procurement and management also cannot be ignored.

Implementing the strategy is absolutely important and its success depends on
efficiency of the human resources, equipment and the interfaces involved. A major
task at the level of operation are order registration, processing, picking, replenishment
and dispatching.

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Components of Information Decisions in Supply Chain Strategy:

 Push versus Pull: While designing the pieces of supply chain, it is necessary to
determine whether these are part of the push or pull phase in the supply chain. Push
systems require an elaborate Master Production Schedule (MPS) and Master
Requirements Planning (MRP). The Master Production Schedule rolls the Material
Requirements Planning (MRP) system. In contrast, for pull systems, information is
required on actual demand for quick transmission throughout the entire chain so that
the real demand is reflected.

 Competitive Strategy: This defines the customer needs to be satisfied through its
products and services. A firm’s competitive strategy depends upon the customer
requirements. It targets the customer segments with a main objective of providing
products and services to cater to the customer needs.

 Product Development Strategy: Mentions clearly the portfolio of new products,

which needs to be developed by a company giving an indication whether efforts
towards these are done internally or externally.

 Marketing and Sales Strategy: Specifically mentions about market segmentation

and details relating to positioning, pricing and promotion of the product.

 Supply Chain Strategy: A wide term, which includes supplier, operations and
logistics strategy. Includes decisions relating to inventory, transportation, operating
facilities and information flows. The strategy specifies the activities of supply chain
such as operations, distribution and service.

 Other Strategies: A company also devises additional strategies for finance,

accounting information technology and human resources.

Logistics Strategies

Formulating a logistics strategy can be viewed from the following three angles:

 Customer demands satisfied through strategy implementation

 Targeting customers

 Resources required for implementing strategies

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 Formulating a strategy is not an isolated process. Logistics strategy needs to have
congruence with the overall goal and strategy of the business. A synergy with the other
domains of the organization is necessary. An example of this can be the Management
Information Systems of an organization encompassing all the functional areas of business.

The MIS, being an information sharing system across the supply chain has
considerable synergy with logistics operation. Considering the importance of formulating a
logistics strategy, the following are the possible approaches:

The following competitive and generic strategies could be pursued for logistics

Operations:

1. Cost Leadership: Achieving cost leadership is facilitated by logistics cost reduction to

a major extent. This can be achieved by many ways. Examples of achieving logistics
cost reduction are:

 Reducing transaction costs through IT support

 Warehouse operations based on scale economics

 JIT, cross docking and postponement, which results in reduction of inventory and
related costs.

 Reduced vendor base and co-partnerships with suppliers.

2. Differentiation: This strategy focuses on offering superior service. Examples of offering

logistics services for differentiation:

 On time and consistent delivery

 Logistics solutions to suit individual requirements
 Tracking consignments

3. Collaboration: A strategy where the customer works in collaboration with the suppliers.
An example here is Vendor Managed Inventory (VMI). In VMI, customer places no
orders but instead shares information with the vendor. This information relates to actual
usage or sales of their product, their current on hand inventory and details of additional
marketing activity. On the basis of this information, the supplier takes responsibility for
replenishment of the customer inventory.

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4. Diversification: Firms having a lot of operations adopt this strategy. The basic objective
here is the lower cost and better control over operations thus providing superior customer
service.

5. Outsourcing: Outsourcing services to logistics service providers having expertise in this

area in order to bring efficiency and effectiveness into the logistics operations. An
example in outsourcing is Customs Clearance service providers. As a majority of
exporters and importers do not have a proper expertise in this area of logistics operations,
many logistics service providers offer customs clearance services to their clients. This can
reduce the overall transaction cost.

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Implementation of Strategy

Implementation of the strategy is an important activity after the formulation. The firm
needs to evolve a proper framework to successfully implement its logistics strategy.
Important aspects for implementation of strategy are:

 Financial dimensions of control such as net income return on equity, net profits etc

 Non-financial parameters of control such as quality of service, customer satisfaction,

delivery time etc

 The organizational culture and employee motivational programmes initiated by the

company facilitate behavioral controls for employees.

 The structure of the organization is of importance. Organizational structure with a

wide span of control give higher motivation to employees to perform well and
strategy implementation can be done successfully in such organizations.

 Skills of the implementers of the strategy are also an important consideration.

The successful implementation of logistics strategy depends to a great extent on the

information shared with internal and external customers and also logistics partners.

Transparency at both the buyer and seller’s end helps to build an element of trust, thus
adding value to the customer delivery chain, which makes the task of implementation
simpler.

Thus, the process of strategic logistics planning will improve the overall
responsiveness of the organization.

About Profile of the Study under the research study:

History of the companies:

The following are the history and profile of the companies under the study:

Maersk Line:

Maersk Line is the global container division and the largest operating unit of the A.P.
Moller – Maersk Group, a Danish business conglomerate. It was founded in the year 1928. It

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is the world's largest container shipping company having customers through 130 countries. It
employs approximately 7,000 sea farers and approximately 25,000 land-based people.

At the beginning of the 1920s, A.P. Moller considered possibilities of going into liner
trade business. The tramp trade, where vessels sailed from port to port depending on the
demand, was expected to lose ground to liners in time. On 12 July 1928, the vessel LEISE
MÆRSK left Baltimore on its first voyage from the American East Coast via the Panama
Canal to the Far East and back. The cargo consisted of Ford car parts and other general cargo.
This heralded the start of Maersk's shipping services. Maersk Line began to grow in 1946
after the Second World War by transporting goods between America and Europe before
expanding services in 1950. On 26 April 1956, ocean-borne container transport was
introduced with the shipment of a Sea-Land container aboard the SS Ideal X from Port
Newark, New Jersey, to Houston, Texas. In 1967, Anglo carrier P&O was part of the first
European initiative, a pooling of liner services from four companies, into the new company
Overseas Containers Limited (OCL). Both Sea-land and P&O would later be taken over by
Maersk Line as it expanded operations between 1999 and 2005.

In 1999, Maersk entered into an agreement on acquisition of Safmarine Container

Lines (SCL) and its related liner activities from South African Marine Corporation Limited
(Safmarine). At the time of acquisition, Safmarine Container Lines operated approximately
50 liner vessels and a fleet of about 80,000 containers. It covered a total of ten trades and
fully complemented Maersk Line’s existing network. Safmarine Container Lines joined
the as an independent unit with its own liner activities.

On 10 December 1999, the A.P. Moller Group acquired the international container business
of Sealand and Service Inc. The business was integrated with the A.P. Moller Group
companies and as part of the integration, Maersk Line changed its name to Maersk Sealand.
The acquisition comprised 70 vessels, almost 200,000 containers as well as terminals, offices
and agencies around the world.

In May 2005 Maersk announced plans to purchase P&O Nedlloyd for 2.3
billion Euros. At the time of the acquisition, P&O Nedlloyd had 6% of the global industry
market share, and Maersk-Sealand had 12%. The combined company would be about 18% of
world market share. Maersk completed the buyout of the company on 13 August 2005, Royal

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P&O Nedlloyd shares terminated trading on 5 September. In February 2006, the new
combined entity adopted the name "Mærsk Line"

At the time the company was folded into A.P. Moller, it owned and chartered a fleet
of over 160 vessels. Its container fleet, consisting of owned and leased vessels, had a capacity
of 635,000 twenty-foot equivalent units (TEU). Royal P&O Nedlloyd N.V. had 13,000
employees in 146 countries.

By the end of 2006, Maersk global market share had fallen from 18.2% to 16.8%, at
the same time, the next two largest carriers increased their market share, MSC went from
8.6% to 9.5% and CMA CGM from 5.6% to 6.5%. In January 2008, Maersk Line announced
drastic reorganisational measures.

In November 2015, after lower than expected results, Maersk Line announced its
decision to lay off 4000 employees by 2017. The group said it would cut its annual
administration costs by $250 million over the next two years and would cancel 35 scheduled
voyages in the fourth quarter of 2015 on top of four regularly scheduled sailings it canceled
earlier in the year.

As of October 2015, Maersk Line along with its subsidiaries of Seago, MCC,
Safmarine and Sea-Land controls a combined 18% share of the total container shipping
market

Maersk Line is best known for its coverage across the globe. Other than its main trade
lanes of Asia-Europe and Trans-Atlantic trades, Maersk Line also offers extensive coverage
between South America and Europe as well as to Africa. The company also pioneered the
innovative concept of Daily Maersk in 2011 which provided a premium guaranteed service
between supply ports of China and European base ports. Despite support from the trade,
Maersk Line was forced to cut down services due to over supply. Recent restructuring of its
product have included upgrades to their Asia - Australia, India to West Africa, and China to
America routes.

Other than the main trades, Maersk Line also operates many continental trade lines. It
operates its Intra South East Asia through MCC Container Lines, Europe through Seago
Lines and recently re-launched the famous Sea-Land Service brand for its intra-Americas
trade lanes.

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TVS Logistics Ltd:

TVS Logistics was started as a business unit of TVS & Sons and was later established
as a separate company named, TVS Logistics Services Limited (TVS LSL) in December
2004. With operations in UK, Spain, Thailand, USA, Germany and China, through
warehouses located both in India and abroad. Through Joint Ventures mentioned in the above
countries, TVS Logistics provides seamless supply Chain solutions to its clients.

TVS & Sons, established in 1911 is the parent company of the TVS Group and is a
leading automobile distribution company in India. During the year 2010-11 the company
attained a turnover of 6000 Crores and has direct employee strength of 6000. Being the
trading and distribution arm of the group, the business activities of TVS & Sons include
Dealerships for automobile vehicles. Being the trading and distribution arm of the group, the
business activities of TVS & Sons include Dealerships for automobile vehicles, Distribution
of spares for after –market, sales and service support for Garage Equipment, products for off-
highway application like Construction & Material handling.

TVS Logistics was started as a business unit of TVS & Sons (www.tvs.in) and was
later established as a separate company named, TVS Logistics Services Limited (TVS LSL)
in December 2004.TVS Logistics has an annual turnover of over Rs. 1,200 Crores and
controls about 3 million sq.ft of warehouse space in India. With operations in UK, Spain,
Thailand, USA, Germany and China, through warehouses located both in India and abroad.
Through Joint Ventures mentioned in the above countries, TVS Logistics provides seamless
supply Chain solutions to its clients. TVS Logistics has been considered as the best choice for
low cost sourcing and complete logistics management of automotive components from India.

Over 16 years of rich experience in managing warehouse operations. It has Strength

of over 7000 strong head counts. The Fleet volume exceeding 800 nos. in supporting Material
Handling Solutions. Daily average of 650 trips to support Milk run activities for OEMs.
Around 950 vehicles plying on road, with the option of GPS tracking facility, to meet the
Line haul activities. Their vision is to create integrated supply chain for their customers by
providing high quality and cost effective logistics services globally, which will be the best of
its class in the industry

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 They are mostly concentrating on customer service for quality policy. The company
also committed to add value to Their customer’s operations by providing quality logistics
services through adoption of good management practices in the entire supply chain.

TVS LOGISTICS will enhance customer satisfaction levels by:

 Partnering with customers as well as service providers

 Understanding and responding to customer’s needs and expectation

 Furthering customer relationship practices, and

 Continually improving Their internal processes as well as end-to-end supply chain

processes

Their critical governance areas are:

 Workplace Management: Creating a workplace environment that enables career

planning, development, and succession.

 Marketplace Responsibility: Delivering quality services to Their customers and

continuously upgrading on the service level standards.

 Environmental Stewardship: Commitment to reduce environmental impact and strive

for preserving a green supply chain.

 Community Engagement: Creating a platform that helps the firm to engage in

community welfare activities.

 Sustained Financial Performance: Efficient performance management systems in

place to constantly monitor the firm’s financial goals in the long run.

TLPL Shipping & Logistics Pvt.Ltd.:

TLPL is part of the Transworld Group of Companies which was founded in 1977
and with unmatched capabilities developed over the years, has emerged as an internationally
business house of repute. The Group is expanding its business through innovations stemming
from a global perspective. The Group's determination to have a global presence is supported
by a fundamental philosophy - to explore and discover new business horizons. Transworld
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Group's scale of operations is expanding limitlessly on land and sea. Besides Ship Owning,
Shipping Agencies, Ship Management, Marine & Container Repairs, Container Storage,
Inland Transportation, the Group also has interests in Freight Forwarding and Logistics.

They have on board, a team of professionals who are qualified and equipped to
deliver specialized services that are based on customer's varied requirements. Their priority is
to provide customized solutions to assist Their customers in being more competitive in their
respective markets. Their solutions are specifically designed for the challenges and
opportunities unique to each client.

In today's competitive scenario, when the customer's demands are ever changing and
increasing, it is but natural that we try and stay above the rest in order to provide value for
Customer’s money. We know the importance that you, as their customer, attach to customer
shipments and this is the reason why we keep a track of each and every booking.

A strong presence in India with a vast network and own offices in almost 20 locations
in India, we can proudly state that “we know India like no one else does”. We cover every
port and major city in India and you can safely rely on us for scheduled delivery and
distribution to any part of the country.

At TLPL, we aim to provide creative and practical ideas along with the means to
execute your simple and even the most complex logistics problems. By providing clients with
ready solutions to their logistics problems, TLPL continues to meet its commitment to
quality in logistics services.

TLPL core activities are:

 Agency Business

 Freight Forwarding & Door-to-Door Logistics

 Projects & Bulk Cargo Handling

 Specialized Cargo Handling

 Air / Ocean

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Seaway:

Seaway has achieved the distinction of being one of the leading logistics service
providers in India offering integrated and turnkey services in shipping and logistics domains.

Freight Forwarding:

Seaways brings 20 years of expertise in ocean freight forwarding, offering freight and
ancillary services through their own divisions for various cargoes. Under Freight Forwarding
business, Seaways handled more than 100,000 TEUs in FY15 of ocean freight and more than
580,000 kgs of air freight cargo.

The Ocean Forwarding Division is a licensed Multimodal Transport Operator (MTO)

providing end-to-end FCL and LCL solutions. Being a member of FORCE, an international
association of freight forwarders, Seaways has well-spread global network and can provide
cost effective solutions for all import and export cargoes.

Their well-diversified cargo portfolio includes agri-products, steel, aluminum, alloys,

fertilizers, power, chemicals and infrastructure-related project cargo. Seaways is well placed
to handle large volumes of cargo including regulatory requirements.

DOOR-TO-DOOR SERVICE:

SEAWAY offer on-demand door-to-door services between ports and inland locations
using multimodal transport solutions to clients who wish to have their cargo picked up from
their doorstep and have it dropped at their door step. All the clearances (including Customs
clearance at ports and ICDs), permits and other statutory requirements for cargo movement
are inclusive of this service.

LCL & FCL:

 Committed weekly consoles

 Fixed days for sailing and stuffing

 Free carting at sheds

 Strong network with own offices & reliable Agencies

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  Specialists in handling DDU / DDP shipments

 Expertise in handling hazardous cargoes

 Regular DND movement services from major inland locations to NhavaSheva

AIR CARGO:

 Serving domestic & international routes

 Services for all types of cargoes with key focus on Pharma, Engineering, Perishable
Goods & Temperature-controlled shipments

 On-demand chartered plane services for special / high value cargo

 IATA registered

ROAD FREIGHT:

 Huge network of transporters across India - enabling reach to deepest hinterlands

 Expertise in moving cargo to & from Nepal and Bangladesh - including border
clearances

 Specialized in movement of cargo to various inland locations in India

Liner Agency:

Seaways Group provides liner agency services to various leading MLOs and shipping
lines since inception at various ports and inland locations in India. Seaways commands
substantial market share in liner agency services (along with in-house Customs House
Agency) on the Indian East Coast.

THE SERVICES INCLUDE:

 Booking of cargo for export

 Handling and delivering import consignments

 In-house Customs House Agency

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  Coordination with CONCOR / authorized trucking companies for inland haulage.

 Sales and Marketing for import and export

 Managing inventory

 Maintenance and repairs, if required

 Line Import and Export Documentation

 Customer Service and support

Chartering and Brokerage:

Seaways offers chartering and brokerage services (from the New Delhi office) in
tankers, dry bulk, chemical, gas and offshore areas. It is manned by experienced master
mariners and well qualified professionals and provides customized solutions in the most cost
effective manner.

 Tanker, drybulk, chemical, gas and offshore brokerage services

 Research and logistics consultancy

 Commercial/Claims Management

 Project Services

 Sale and Purchase

 Financing

 Training

Feeder Vessel Services:

Seaways strongly emphasizes on boosting the regional trade between India,

Bangladesh, Pakistan, Sri Lanka, Myanmar, Sultanate of Oman, Iran and other Middle East
countries. It operates feeder vessels based on trade requirements between these countries,
offering most reliable direct feeder services.

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 It not only caters to the EXIM cargo, but also to coastal cargoes, between various
ports of India. The feeder services provide numerous advantages like fixed sailing schedule,
shortest transit time, carrying heavy bulk and voluminous cargoes, avoiding Pilferage,
tracking cargo in transit etc.

Maxicon offers trans-shipment services from ports in India to ports in Bangladesh,

Myanmar, Thailand, Far East and Middle East destinations through hub ports like Singapore,
Colombo, Port Klang and Jebel Ali. Of the total NVOCC volumes, Maxicon gets 40%
volumes from its India accounts. Having been well positioned in all the trade lanes it
operates, Maxicon is steadily increasing its share of own-branch cargo which is now
accounting for over 80% of the total volumes

PAN ASIA LINE:

Pan asia line logistics pvt ltd. professionally managed full service organization
engaged in Liner Operation activities, international transportation of goods to and from all
around the world. The company is promoted by a team of professionals who are well versed
with the NVOCC and International Freight Forwarding trade and having an experience of
over 20 Years with major Shipping Lines, NVOCCs and Air Freight Forwarding Companies.

AN ASIA LOGISTICS INDIA PVT LTD, was incorporated at CHENNAI, INDIA in

2005 by a group of like-minded professionals with vast experience in the shipping Industry,
and operates under the registered brand name “PAN ASIA LINE” ( a.k.a PAL)

The company provides a multitude of shipping activities with NVOCC operations as

its Core business offering containerized Ocean transportation services, within the region
encompassing INDIA – MIDDLE EAST – SE/FE ASIA & East Africa.

PAN ASIA LINE has its own offices at major gateway ports and ICD’s in INDIA, apart from
having dedicated agency Network within its service region.

 PAN ASIA LINE operates with a fleet of owned/leased fleet of about 6000 TEUS,
consisting of 20’, 40’ Dry Van containers, special equipment such as FLAT RACKS,
OPEN TOPS and Brand New Reefer Containers.

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  The company also offers ocean transportation services for hazardous and non-
hazardous cargoes, in ISO Tanks, representing some of the well-established ISO Tank
operators.

 The company is well reputed within the region, offers quality services to its clientele
within the service area and is amongst the TOP TEN OPERATORS within its
business segment operating India.

 Adapting the latest technology, including WEB BASED software for the product
offering, has helped the company to provide quality services to its customers at par
with the best industry, but with a personalized and customer centric approach to
business.

Panasia line specialize in providing Liner Operations services, Door to Door Logistic
Solutions. Their services include air and ocean consolidation, freight forwarding, vendor
consolidation, customs clearance, distribution and other value added global logistics services
for a complete supply chain solution. Their commendable success has become possible due to
the ‘Customer Centric’ policies followed by the Pan India Logistics team. The experience of
their senior management with global supply chain management trade, coupled with hard
work of their operations team it understands that keeping their associates happy is of prime
concern and delivering them the best possible quality products on time and at minimum cost
is of utmost importance.

The Company has commenced its operations in June 2005. The day to day
management is carried out by professional managers at various locations, headed by
managing director. To become a preferred carrier in the identified trade lanes.

PAN ASIA LINE is the brand name of PAN ASIA LOGISTICS INDIA PVT LTD and has
been launched in June 2005 by a group of likeminded professionals with vast experience in
Shipping Industry. The company s registered and corporate office is located at Chennai.

To be a premier container line, which offers prompt, reliable and customer centric
services to its clientele, in the Indian Sub-continent, Arabian Gulf, and South East & Far East
Region and aspires to become market leader in the years to come.

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 Pan asialineare committed to provide complete logistics solutions to Their customers,
through a proactive and responsive approach to customer’s needs, competitive pricing and
quality services. The company is also committed to continually provide training and growth
opportunities to its employees.

The future plans of the company include:

 Expansion of the service areas gradually, to various parts of the globe especially into
base ports on the Red Sea and NW Europe.

 Expand the range and spectrum of services being offered at present to cover the entire
logistics requirements of the customers, including customs clearance, door delivery,
ware housing etc.

 To venture into Domestic and International Bonded Warehousing (Container Freight

Stations) with partnerships seeking internal and external Investments.

 To strive continually to become a ONE STOP SHOP for shipping and logistics

LOGISTICS AT GLOBAL MARKET:

Global Logistics is system is important for domestic operations to increase the

reputation of the company and to meet the global market as well. Global logistics operation
must accommodate not only domestic requirements, but should also deal with increased
uncertainties associated with distance, demand, diversity and documentation. With this
background, there is a necessity for logistics managers operating globally to develop a wide
variety of capabilities and expertise. Globalized economies have created a host of business
opportunities beyond the national boundaries of a country. The world has become a global
village owing to the rapid advancement in information and communication technologies.

The internet in today’s world made the logistics to reach the global market easily. As
the competition evolved in global logistics, it includes demand forecasting, packaging,
labeling, documentation flow, customer service and parts and service support, which are
outbound. Production, scheduling, procurement, and the handling of returned products form a
part of inbound movements.

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 The local intermediaries who have expertise in customs clearance and other
formalities of the international trade will look forward for the global growth. In the import
and export business, the physical movement of cargo, the role of intermediaries are quite
indispensable. It includes:

 Export Management Companies EMCs are intermediaries that market another

firm’s products overseas.

 Export Packers They assist the exporter with special packaging requirements needed
to reach some export markets.

 Customhouse Brokers These are usually tied to freight forwarders in exporting

nations. The customhouse broker meets the importer’s shipment, and guides it
through customs seeking to use tariff classifications that involve the smallest charges.
Then goods are delivered to the importer’s place of business.

 Publication Distributors Publication distribution firms are specialized

intermediaries. For example, an airline company has this service that includes
wrapping, destination sorting, addressing, and database management, and so on for
magazines. Magazines move overseas by air and then are turned to post offices for
delivery, saving on international package costs.

 Goods Surveyors They are frequently referred to in international trade and are
retained by the buyer, seller or both to inspect their quality and retain them. Parts
Banks Several firms, often airlines, offer this service. This helps manufacturers to
store important repair parts throughout the world, where they can be quickly flown to
customers with equipment “down”. Container Leasing Companies these companies
facilitate inter modal movements because they can relieve individual carriers of the
financial burdens and control responsibilities they would have if they had to own all
of their equipment. Companies lease containers on both a short and long term basis.

 Export trading Companies Export trading companies are a distinct intermediary.

They actually buy the manufacturer’s goods, take title, and then sell these goods in
the export market. ETCs are customers of manufacturers in selected markets. By
selling to an ETC instead of the importer, the manufacturer removes himself from
some of the financial risks associated with exporting. Risks include political
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 instability, importer creditworthiness, and the risk of unavailability of foreign
exchange.

Modes of Transportation in Global Logistics

Transportation plays a vital role in the movement of cargo within or between

countries.

Selection of the transportation mode depends upon the following factors

 Location of market
 Cost of transportation
 Speed of cargo transportation
 Reliability of mode

Air: Advantage of this mode is responsiveness as it can quickly respond to urgent and
unpredictable demands for parts or components. There is minimum transit damages to the
cargo. Also the insurance cost is lesser when compared to other modes. This mode is
confined to high value density items – items having high selling prices where the
transportation cost is an insignificant percentage of the price of the product. By using air
transportation, since the value of cargo is high, the capital tied up in inventory in transit is
released fast.

Sea: Used mostly for cross border cargo movement. The types of ships used are as follows:

a. Independent lines: Operate and quote rates individually and independently. They
accept cargo from all shippers through freight forwarding agents.
b. Tramp vessels: Do not have any fixed route or schedules and operate on a charter
basis. They are mainly involved in bulk cargo transportation.
c. Conference lines: Association of shipping companies across the world. They join
hands to have common codes/rules for cargo movement, freight rates, shipping
conditions etc.

Road: Preferred when countries are connected by land and other options are either costly or
not feasible. In India, roads are an important mode of cargo movement.

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Barriers to Global Logistics: A host of barriers hinder global logistics. Three significant
barriers are as follows:

Figure 4.10

Barriers to Global Logistics

(Source: Aleksandar Trajkov, MA(2011)

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 Markets and Competition

Restrictions of entry, availability of information, pricing and competition are the

market barriers. Poor availability of information is one more barrier.

Tariffs are the other marketing-related barriers. Tariffs are additional cost elements,
which need to be considered while evaluating foreign sources of supply. Also tariffs are
political, and are subject to change as and when government policies change.

While most international firms experience a highly competitive environment, various

rules concerning competitive governance is also proving to be global logistics barrier. A
combination of lack of awareness regarding global rules as well as the necessity to conform
to norms of particular geographic regions is a competitive barrier.

Financial Barriers

These result from forecasting and institutional infrastructure. Though it is not simple
to forecast in any situation, it is very difficult in global environments. The challenge in
domestic forecasting is prediction of unit or dollar sales on the basis of customer trends,
competitive actions as well as seasonality. In a global environment, the challenges also
include exchange rates, customs actions, and government policy complexities. Barriers in
institutional infrastructure arise out of the major differences in intermediaries like banks,
firms, and legal counselors or transport carriers. A combined financial and institutional
uncertainty makes it difficult for planning product and financial requirements.

Distribution Channels

Differences in the distribution channels such as standardization of infrastructure as

well as trade agreements are a barrier confronting logistics managers. Infrastructure
standardization means the differences in transportation and material-handling equipment,
warehouse and port facilities and systems of communication. While there are recent efforts
for standardization with respect to containerization, there are a lot of major differences in
global transportation equipment like vehicle dimensions, capacity, weight and rail gauge.

When there is no standardized infrastructure, products are loaded and reloaded into
different vehicles or containers, while crossing national boundaries, which results in higher

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costs and time. Trade restriction barriers can also influence channel decisions, such as rules
restricting volume of imports or increase duties once a specified volume has been reached.

Logistics System Designing Process:

The purpose of designing a logistics system is to standardize the flow of commodities

and information. The scope of the logistics process – “between the point of origin and the
point of consumption” – is thus conceptualized as covering a firm’s suppliers and its
customers.

Figure 4.11

(Source: http://www.techrider.ca/logistic.asp )

Issues in Logistics sector:

In the latest survey by supply chain 24x7, it was known that India was reaching its
business from 36.7% to 60% in logistics sector. And it also found few emerging issues that
has been arisen in logistics sector to meet the current market. The global market revise that

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the decentralization is the only strategy which will make the logistics sector to come up on
with the higher values, innovative methods and effective roadmaps.

The current technology investments are supposed to fit the 4PL system, the emerging
key issues in logistics management are:

(1) Governance: In a mature operation with critical mass, the company generally relies
upon local decision-making authority.

(2) Reliance on local talent: The Company entering a new market should consider
planning upon increased reliance on local hiring and local leadership.

(3) Local partnerships: Partners with local knowledge and experience can be critical to
increasing the likelihood of success, especially in the early stages of expansion. As
mentioned, the characteristics of each country will determine whether reliance on
local partnerships will increase or decrease over time.

(4) Multipurpose infrastructure: Demand and environment in each country can be

highly unpredictable. A multipurpose infrastructure including a distribution network,
warehousing operations, multi-mode transportation, which supports “tap on tap off”
capability, enabling flexibility and responsiveness, are among the key attributes of a
successful emerging market operation.

(5) Low visibility and low touch: Companies entering emerging markets may have to
accept a lower level of visibility. The risks accompanying lower visibility, however,
can be actively managed through manual checkpoints and interventions.

(6) Reliance on manual processes and frequent touch-points: Manual processes will
likely be prevalent in emerging markets from the time of entry all along the maturity
curve, although generally there is the potential to leverage systems and automation in
the late stages. We believe that the emphasis from the beginning should be upon the
integration of people and partners rather than the integration of systems.

(7) Reduction of complexity without sacrificing localization: Scaled efficiency may

not be attainable, but reduction of complexity across products and services is essential
at every stage from entry to critical mass.

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Challenges in Logistics Sector:

As the industry differs one from another, such that the services and logistics
management of one company differs from another.

Policy and adaptability

In addition to the elements in the logistics cycle, two additional factors—policy and
adaptability- directly relate to the logistics system.

 Policy: Government regulations and procedures affect all elements of the logistics
system. Many country governments have established policies on the selection of
medical products (usually based on essential medicine lists), how items are procured
(for example, international competitive bidding or using prequalified
manufacturers); when items are distributed; where and how items are stored; and the
quantities customers receive (often called dispensing protocols). Fiscal and budget
policies are often some of the most influential policies affecting a logistics system,
whether related to securing funding for product procurement; or to pay for critical
infrastructure, such as storerooms and transportation. Health program managers and
other personnel dedicated to logistics can influence these policies, but they may face
great challenges when trying to implement or change them. These managers and
personnel should stay up-to date on current policies and complete them, as specified.

 Adaptability: Adaptability is a characteristic of all successful logistics systems.

Logistics systems must be designed to be flexible and adapt to constantly changing
circumstances, such as changes in demand for a product, or changes in funding
policies for logistics activities. You cannot redesign the logistics system every time a
new product is introduced, or when consumption increases. In one sense, adaptability
speaks to the logistics system’s ability to successfully obtain the resources that are
necessary to address changes in demand. For example, as demand increases, the
logistics system needs to be flexible enough to respond to the increase in the
quantities of products that will move through the system. This may mean building
more warehouses and purchasing more vehicles, or increasing the frequency of
resupply to avoid the need for larger storage facilities. The system’s ability to meet
these needs—its adaptability- will impact commodity availability. As governments
continue to propose ways to reform the entire health sector-such as decentralization,
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 integration, or cost recovery-the logistics system must continue to function when
reforms are implemented. To function, a logistics system must be adaptable.

While the supply chain industry is undergoing with rapid transformation can be
perplexing, and may be overwhelming. Now days the manufacturers are providing various
options for packaging designs and logistics management. And in that they are more
concentrating on the e-commerce approach as the logistics was playing vital and eminent role
in reaching the customer service. The following are the top opportunities and the challenges
for the logistics sector in this complex world

 Supply Chain Coordination Services

 Supply Chain Harmonization Services
 Supply Chain Orchestration Services
 Supply Chain Performance and Benchmarking Services
 Transportation Planning and Execution Services
 Supply Planning and Inbound Services
 Replenishment Planning and Distribution Services
 Order Promising and Delivery Services

Transport Related Challenges:

In India road has become a pre-dominant mode of transportation of freight cargo. It

was estimated from an analysis from Ramachandran & mayor that India nearly follows
60.2% of the cargo which was moved by road, 32.1% on rail and 7.4% on shipping. So, as
per this, it was revealed that the transportation related challenges are more in logistics sector.

The roadways are the most predominant source of transportation used by Indian
logistics industry. Apart from e-commerce industry, majorly the other manufacturing
industries are also concentrating more on roadways. The railway track has also been
increased from last two decades and it is also becoming one of the major sources after
roadways. As the trend was ever changing, the airways also used by few logistics industry, to
make the product to reach the customer within short duration.

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Issues of Port Sector:

The port sector was coming with High turnaround times- Data from Indian ports
association shows that ports in India suffer from high turnaround times for ships. JNPT, the
premiere port in India, has more than two times the turnaround time of Colombo and
Singapore ports because of congestion on berths and slow evacuation of cargos unloaded at
berths. Inadequate depth at ports are the another issues in depth at many ports in India is not
enough and dredging tenders take a long time in getting awarded. As a result with the
existing dates many ports are unable to attract very large vessels. Coastal shipping has not
taken off, so coastal shipping in India is hampered by inadequate port and land side
infrastructure which hampers large scale use of it for freight movements.

Storage Infrastructure related issues:

The logistics sector also facing few more storage infrastructure related issues, as it
was becoming poor in maintenance. The ICD/CFS infrastructure available for EXIM trade is
inadequate. The land requirement for setting up ICD/CFS at an appropriate place is difficult
to come by as several hurdles have to be cleared in the consolidation of land. As a result
many logistics companies with an interest in setting up ICD/CFS eventually fail to do so.
While it is difficult to set up a facility, at the same time the existing facilities are plagued with
several issues:

i. Many of the older facilities today are located within city boundaries restricting day
ii. Movement of trucks.
iii. The approach roads to the facilities are poor making evacuation of cargo difficult.
iv. Most facilities have issues of inadequate parking, lack of available land for
expansion etc.

Tax Structure related issues:

The GST structure is totally different for this industry, Goods and service tax is a
colligation of multiple taxes levied by both Central (i.e, excise duty, countervailing duty and
service tax) and state (Value-added tax, Octroi and entry tax, luxury tax, etc) governments
when an end-user purchases goods or services. It means same level of taxation would be
charged on a specific product or service across the entire country irrespective of being
manufactured and sold in different states

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 Figure 4.12

(Source: https://economictimes.indiatimes.com/markets/stocks/news/gst-will-change-the-
way-india-does-business-who-will-win-who-will-lose/articleshow/53517955.cms)

Technology & Skill Related Challenges:

The logistics sector in India has suffered a lot due to the low rates of technology
adoption and poor skill levels.

There is a substantial opportunity to save on transportation and In Transit Losses with

the adoption of technology

Future growth of Logistics in India

Macro-economic changes and shifts in trade patterns have their impact on global supply
chains. They provide opportunities as well as challenges. Let’s have a closer look at some
developments in logistics that are directly or indirectly caused by changes in trade patterns, in
GDP growth or in customer behavior. The following is to be concentrated by the logistics
industry to grow its sector eminently:

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 Growth patterns: Growth in the logistics industry is no longer driven by exports
from Asia to North America and from Asia to Europe. It will come from elsewhere,
and will be more fragmented, more unpredictable and more volatile. Economic and
population growth will be increasingly centered in cities. Infrastructure is becoming a
major determinant for growth.

 Flexibility: Meeting consumer’s requirements at multiple locations with multiple

transport modes at different times requires a flexible supply chain that can adapt
easily to unexpected changes and circumstances.

 Globalization: International, mature and emerging markets have become a part of the
overall business growth strategy for many companies. Going ‘international’ has
become the standard and logistic solution providers need to enable that trend.

 Near shoring: As labour costs in Asia and transportation costs rise, increasing
amounts of manufacturing are being brought closer to the end user.

 Multi-channel sourcing: End-consumers increasingly source via multiple channels,

ranging from brick & mortar shops to e-commerce. The logistics industry needs to
support multi-channel strategies of their customers.

 Information technology: The growing complexity and dynamism of supply chains

requires increasingly advanced Information Technology solutions.

 Continuity: To be able to secure speed to market and to reduce risk of delays,

alternative transport modes and routes are required to support the continuing trend of
outsourcing of logistics services.

 Sustainability: Customers increasingly prefer products that are made and sourced in
‘the right way’; minimizing business’ social, economic and environmental impact on
society and enhancing positive effects.

 Compliance: Anti-bribery and corruption legislation is having an increasing impact

on supply chains, since multinational companies demand that no facilitation payments
are made during the export of their goods, yet still seek to source from low cost
countries, which are often also at the bottom of Transparency International’s global
corruption index.

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  Partnerships: Manufacturers continuously search for supply chain innovations and
gains through partnerships with logistic service providers.

 End-to-end visibility: Complete visibility of the entire supply chain aspires to

achieve true demand-driven planning, allowing efficient response to changes in
sourcing, supply, capacity and demand.

 Complexity: Supply chains are becoming increasingly complex and dynamic with
sourcing locations being changed increasingly quickly and purchase orders becoming
smaller and more frequent.

These developments will have their effect on day-to-day logistics, and companies will
need to prepare for ‘the new normal’ in supply chain management. With all these changes,
staying up-to-date on the latest trends in logistics is more important than ever.

Future Trends of Logistics Industry:

To achieve this, the logistics industry needs to focus on the following fronts:

1. Expand distribution channels and increase consumer reach

2. Reduce operational cost
3. improve delivery time
4. Overcome infrastructure bottlenecks
5. Implement E-Infrastructure
6. Efficient port utilization and decreasing the turnaround time
7. Increase investments in storage infrastructure i.e. warehouses & cold storages
8. Organize the trucking operations on a pan India basis
9. Adopt the latest technology
10. Address skill gaps issues

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