Mahindra Cold Chain

Logistics
Supply Chain Management Project

By Group No 5, Section A
Aashirwad | Aseem | Vineeli | Sandesh | Gaurav
Table of Contents
Logistics in brief .................................................................................................................................. 2
Mahindra Logistics .............................................................................................................................. 2
Competitive Advantage of MLL........................................................................................................... 2
Unique feature of MLL - People Transportation Model ..................................................................... 3
Key drivers of logistics industry .......................................................................................................... 3
Key drivers of Cold Storage Logistics industry .................................................................................... 4
Cold chain Industry Analysis – Porter’s Five Forces Model ................................................................ 4
Challenges faced by Cold Chain Logistics Industry ............................................................................. 5
The Current Cold Storage Gap ............................................................................................................ 5
Mahindra Logistics Ltd. Supply chain .................................................................................................. 6
MILES (Mahindra Integrated Logistics Execution System).................................................................. 7
Warehouse Management System (WMS) .......................................................................................... 8
Current supply chain – Cold storage (unorganized retail) .................................................................. 9
Cold Storage Opportunity for MLL ..................................................................................................... 9
Business Model of MLL ..................................................................................................................... 10
Incentives by Government for growth of Cold Chain ....................................................................... 11

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Logistics in brief
Logistics is an important link that connects many processes viz. Supply Chain Management, People
Transport Management. In essence, logistics remains a basic need for any business to survive.
Logistics is the wheel that enables endless business activities. A small obstacle in a single process can
impede the whole process altogether. Mahindra Logistics Limited recognizes this by creating logistics
systems that are unique and dedicated, yet flexible enough to fit the needs and demands of any
customer. Mahindra Logistics Limited (MLL), a subsidiary of the USD 16.7 billion Mahindra Group,
provides integrated third party Supply Chain and People Transport Solutions, to various companies
across a miscellaneous cross section of industries.

Mahindra Logistics

Mahindra Logistics, a subsidiary of Mahindra was founded as a strategic initiative to boost the focus
on logistics services for both internal and external customers. MLL has revenues in excess of Rs.
1750 crores. It has over 88 operating locations across the country. MLL has Deployment over 25,000
vehicles a month across transportation operations. The operational space of MLL is over 5 million
square feet for warehousing. MLL manages logistics for over 1,000,000 finished vehicles per annum.
The industry has acknowledged MLL’s Supply Chain Excellence with plenty awards.

Competitive Advantage of MLL

Mahindra Logistics has adapted Mahindra Group's Business Excellence Model - The Mahindra Way
(TMW). Key features of TMW are as follow:

1. Objective
- To ensure enhanced focus on customer centricity and achievement of sustainable
business results by adapting Integrated approach for promoting excellence in everything
that it does
2. Approach
- A scope of TMW extends beyond the quality of MLL's services to encompass excellence
in all its functions, processes & operations to achieve its business objectives efficiently
3. Methodology
- Annual TMW assessments are done by experienced assessors

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 - An impartial review of the progress the companies have made on TMW drive for
excellence.
4. Incentives
- 'TMW Stage of Maturity' certificate to reflect the level of excellence it has achieved in
the practice of TMW.

Unique feature of MLL - People Transportation Model

• People Transpiration Model is an IT-enabled customised people transport solutions that
supports employee transportation needs of corporate enterprises

• It is an asset-light business model which facilitates flexibility and scalability without diverting
focus from its core competence of integrating resources

• It provides one-stop solution to its customers’ people transport needs

• It caters specific requirements of IT sector in terms of employee movement, safety and

security, and shift-based working

• It includes more than 20,000 trips per day, deployment of 6,000 vehicles every day, 8,000
thousands drivers on road with more than 200 corporate customers

• This model has recently begin adding value to major airlines by managing their crew
transport with a fully IT enabled business model, ensuring safety, visibility and excellent on
time performance

Key drivers of logistics industry

• The demand for extreme efficiency of inventory and working capital management continues
to drive reliance upon third parties for assistance with managing operations.
• There is a general trend of increased outsourcing of 3PL functions by middle market
companies.
• India has a large coastline and has focused on developing many ports for more shipping
opportunities.
• India also boasts of high road connectivity and rail connectivity.
• With each passing year, more and more towns are getting airports and better air
connectivity. The government is also working on modernizing existing airports to handle
more traffic.
• As industries continue to manufacture more products, their dependence on logistics for
supplying raw materials and transporting finished goods continues to grow.

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 • All over the country, people are moving up the economic chain, and as their incomes rise,
they require more goods and services from different parts of the country.

Key drivers of Cold Storage Logistics industry

• With growing demand of fruits and vegetables and rising income levels of people, organized
retailing is going to be the strongest driver for cold chain sector in future. Many players like
Bharti-Walmart and Aditya Birla are investing heavily in building a strong infrastructure for
preservation of produce for long period of time.
• There is also a high growth in food processing sector. Several Mega Food Parks have been
established by the government in order to develop cold chain sector in the country.
• The Government has come up with some initiatives. These will attract investors into the
development of cold chain sector.
• A shift towards horticulture crops can be observed. Farmers are moving towards cultivation
of horticultural crops which require refrigerated storage.
• The demand of pharmaceutical industry is also on the rise. Indian vaccine market is growing
at a rate of 25-30 per cent per annum. Vaccines require temperature controlled storage right
from manufacturing stage till usage point which makes cold chain management imperative.

Cold chain Industry Analysis – Porter’s Five Forces Model

1. Threat of new Entrants: Medium to High
• Highly profitable business makes threat of new entrants high.
• Reduction in custom duty has increased attractiveness of the business
 National center for cold chain development has been set up as an autonomous institute for
development of the field.
2. Buyer’s Power: High
 Switching cost from one service provider to another is less.
 Customer service has highest importance in this industry.
 Options of traditional medium are still available in the industry.
3. Supplier’s Power: Medium to High
 Very high technical competency, system design expertise and application processes are
required for chain set-up
 Currently very few players in the market who have that expertise.
4. Threat of Substitution: None
 Currently there is no technology or technique can substitute the cold chain.
5. Rivalry : Low to Medium

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  Presence of strong tradition network have created huge competition for cold chain players.
 Multiple number of companies are present in market.

Challenges faced by Cold Chain Logistics Industry

1. High Energy Consumption cost: Operating costs for the cold storage business in India are
approximately Rs 80-90 per cubic ft. per year as compared to Rs 40 per cubic ft. per year in
the West. Energy expenses alone make up about 30 per cent of the total expenses for the
cold storage industry in India compared to 10 per cent in the West. These factors make the
business of setting up of cold storages a high entry barrier.
2. Rising real estate costs: A fully integrated cold storage facility with one million cubic ft. of
storage space will require an area of an acre to build, which could cost between Rs. 1 crore
and 1.5 crore, constituting 10-12 per cent of the project cost. Cooling units are not mobile
units, and so location becomes a key factor, and with India’s small land holdings, getting a
sufficiently large tract of land to build a cold storage unit becomes a major additional
constraint.
3. Uneven distribution of capacity: A majority of investment in setting up cold storages in India
has been in states like Uttar Pradesh, Uttaranchal, Maharashtra, Gujarat, Punjab and West
Bengal. Secondly, cold storages that have been set up can cater to single commodities only
which are a big bottleneck.
4. Lack of Logistical Support: Cold chain industry in India is fragmented and it will require heavy
investment in building technology enabled cold storage facilities to cover entire value chain
from procurement to transportation in refrigerated trucks to retail outlets in cities.
5. Human Resources: There is lack of skilled labour and human resources in this sector.
6. Other Challenges: Capital intensive infrastructure , High operational costs; low yield models,
High insurance/ risk coverage premiums, Nascent, limited knowledge, limited experience
and Large gap in demand supply conducive to small unorganized service providers are some
of the other challenges faced by this industry.

The Current Cold Storage Gap

The industry’s future can be gauged from the fact that there is a huge gap between the nation’s

17,148
15,574 15,405
11,988
9,412
7,126
3,591
1,441 1,605 2,138

Central East North South West

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demand for cold storages and its availability. Data for the year 2011 from Indiastats.com was
obtained and analyzed to determine the current gap that exists. Major cities were grouped under
five main regions – North, East, West, South and Central. Based on the data, the above graphs were
obtained.

A detailed gap analysis is shown in the below table –

State Region Gap % State Region Gap %

Andhra Pradesh South 61.23% Haryana North 51.12%

Assam East 90.42% Himachal Pradesh North 95.89%

Bihar East 72.95% Jammu and North 94.17%

Kashmir

Chhattisgarh Central 37.02% Jharkhand East 78.64%

Gujarat West 53.89% Karnataka South 83.07%

Kerala South 97.91% Odisha Central 84.14%

Maharashtra West 91.28% Punjab North -2.05%

Manipur East 100.00% Rajasthan West 17.14%

Meghalaya East 98.74% Tamil Nadu South 96.98%

Mizoram East 100.00% Tripura East 81.60%

Madhya Pradesh Central 33.39% UP & North 16.69%

Uttarakhand

Nagaland East 91.43% West Bengal East 46.22%

The total gap amount to around 60%. This proves that Cold Chain Logistics is a very attractive market
and provides ample opportunities for investment. Hence, it was a clear decision for Mahindra to
enter this market since many other major players were also entering this market. The industry is
expected to grow at a CAGR of 28.3% by the year 2017.

Mahindra Logistics Ltd. Supply chain

The primary focus of MLL has been on providing end to end logistics solutions which cover a
plethora of sectors.

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MLL – Technology
MILES (Mahindra Integrated Logistics Execution System)
Efficient and Robust transport planning and management solutions
Leverages on Oracle Transport Management System (OTM) complimented through Hand
Held Terminals (HHT) and Vehicle Tracking System (VTS)
Key Offerings
• Optimization of Route and Fleet which leads to reduced fuel consumption and lesser GHG
emissions
• Consolidation of Load
• Better visibility & traceability of goods in transit
• Seamless exchange of data
• Reduced billing cycle time and transparency in billing and audits
• Easy integration with ERP of partner
• Total integration with the host system for freight order receipt, billing and alerts
• Pro-active alerts related to daily demand, supply of trailers etc.
• Operational update from field provided through Hand Held Terminals (HHT)
• In-transit visibility through transit status of the shipments via GPS or e-mail
• Delivery management - Delivery proof receipt using HHT or web
• Transporter ratings (SLA Based)

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WAREHOUSE MANAGEMENT SYSTEM (WMS)
MLL provides both in house as well as off the shelf solutions for warehouse management. It also has
provisions to provide real time visibility of inventory and order status across different warehouses of
the organization.
Warehouse Management System involves typical sequence of following steps –

1) Receiving
 Management of Purchase Order
 Receipts against PO
 Creation of Goods Receipt Note (GRN)
 Boxing and inspection
 Confirmation of GRN
2) Storage and Put Away
 Automated System controlled Put Away mechanism
 Optimized travel path and storage space
 Item segregation and storage based on item category, Packaging and location type
 Confirmation for Put Away completion
3) Order Processing
 Management of sales orders
 Processing of order based on stock availability
 Order grouping based on picking and shipping sequence
 Reservation of stock against processed order
4) Picking and Shipping
 System Directed Picks in lieu of Travel Path Optimization
 Algorithm based Pick methods eg. First in First out, Near Expiry, Space optimization etc.
 Goods Packaging
 Capture of shipping information

5) Inventory Management
 Cycle Counting Plan on the basis of Location, Zone, Item or Item Category
 Auto adjustment of variations with required approvals
 Replenishment based on pre specified rules and stock levels across locations

6) Configurable to Needs
 Role controlled user access

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  Supports both multi-company single warehouse operations as well as single company
multi warehouse operations
 Flexible warehouse locations
 Flexible strategies for picking and put away

Storage management Inventory control Order management Billing

Current supply chain – Cold storage (unorganized retail)

Problems with the Current Scheme

 20-30 percent wastage across

the value chain
 Farmers forced to sell their
produce at lower prices due to
absence of markets
 Faulty Measurement
 Malpractices in auction
 Bullying by agents
 No storage facilities
 Wastage of time

Opportunity for MLL

 Implementation of a Cold
Storage Unit for storing,
sorting, grading and packaging
 Demand received from
Auctioneers/ Agents through
online portal
 The products are loaded and
transported to the Mandi using
Mahindra Logistics Limited.
 Excess produce is stored in the
Cold Storage Unit, and a
premium is charged from the
farmers.
 Unsold produce is sold to the
Agents/ Auctioneers at a lower
rate the following day to
increase demand of produce

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Business Model of MLL

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Incentives by Government for growth of Cold Chain
The Indian Government provides multiple incentives for the growth of this industry. 100% FDI is
allowed through automatic route. Since 2011-12, cold chain has been given the infrastructure status.
Up to 40% of the cost can be funded by the government as value gap funding. 5% concession on
import duty, service tax exemption, and excise duty exemption on several items is also provided.
Subsidy of over 25% to 33.3% on the cold storage project cost can also be availed. National Centre
for Cold Chain Development was established in 2011, to look into matters related to cold chain
infrastructure. There is also a growing emphasis on Food Parks & integrated cold chain development.
There is a proposed financial outplay for cold chain infrastructure & food parks of approximately
USD 335 million & USD 650 million respectively.

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