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SWOT Analysis
Market Structure
Organized 10% Unorganized Player: Owner with less than or equal to 5 trucks. They contribute about 80% of the revenue. Unorganized 90%
Level of Competitiveness
10 to 100 crore 2% 1 to 10 crore 9% more than 100 crore 0.3%
Penetrating this huge volume of Unorganized Players is by far the biggest challenge
Level of competition is extremely intense, undercutting beyond a point may not be feasible. Hence LSPs have to go beyond rendering just the basic services.
LSP: Logistic Service Provider
Segments Railways
Roadways
Ports Warehousing Civil Aviation
2086
91 1,500 43
Minor Ports 6%
Ports 2%
Nearly 70% of domestic freight is carried by the Road segment and the remaining by Rail segment while the contribution of the remaining two segments is comparatively negligible.
International freight is completely dominated by Sea Port Segment.
Indian Railways is 2nd largest in the world just marginally behind China Indian Roadways is also the 2nd largest behind U.S which has 6.4 million km of network. India has the largest merchant shipping fleet among the developing countries and is ranked 17th globally. Constitutes just 3% of global air cargo.
Growth Drivers Domestic growth FMCG, Retail, Auto & Auto Ancillaries Agriculture commodities, Manufacturing activity Agriculture commodities, Manufacturing activity EXIM and domestic trade
EXIM
15-20%
Low
High
Local
Characteristics of Logistics Sector High costs of operations Low margins Shortage of talent Infrastructural bottlenecks Demand from clients for investing in technology and providing one-stop solutions to all their needs. Consolidation through acquisitions, mergers and alliances.
Customer Satisfaction
Wide Geographic Reach Operational Efficiency Time Factor
Loses of 14% translates into roughly INR 290 billion for various industries primarily due to the Unorganized section
Certainly a huge opportunity for Organized players to cash in by providing the requisite safety and the insurance coverage for the truck load of goods.
Growth Driver
Demand Driver
Agricultural industry
Manufacturing Industry
Infrastructure
Railways Cement Food & Beverages Ports Steel FMCG Civil Aviation Warehouses
FMCG, Pharma and Food processing apart from agro products have substantial requirement
Government Plans
Slightly over 3 times jump from 10th 5YP
11th Five Year Plan (2007-12) (Roads, Railways, Ports and Civil Aviation) 8% of Indias GDP in 2009
(INR billion)
4,457
9.77% 56.3% 24.08% 9.84%
10th
Railways 2,510
> 4 times
10th
Roadways 1,073
10th
10th
606
621
1.72 times
Private Investments
867
368
934
Gross Budgetary Support (GBS) Internal and Extra Budgetary Resource (IEBR)
GBS 37%
IEBR 49%
Aims to remove multiple taxation by abolishing taxes such as Octroi, Central sales tax, State level sales tax, entry tax, stamp duty, telecom licence fees, turnover tax, tax on consumption or sale of electricity, taxes on transportation of goods and services Hopes to increase the tax base Aims to remove the disparity in taxation or differential treatment to manufacturing and service sector.
Impact The introduction of GST in India would mean that manufactures will now base their logistics decisions on operational efficiency instead of tax optimization. Will enable manufacturers and 3PLs to set-up and position their warehouses and distribution channels based on the considerations of time, cost and logic.
Manufacturers will now be encouraged to outsource their logistics and supply chain operations.
Other Tax Reliefs The 100 % deduction allowed in respect of capital expenditure for the business of setting up and operating cold chain facilities for specified products, and setting up and operating warehousing facilities for storage of agricultural produce. The enhancement of limit for disallowance of expenditure made in the case of transporters i.e. to raise the limit from Rs 20,000 to Rs 35,000 effective October 1, 2009 and NIL TDS for road transport, would certainly address the stringent practical difficulties, which is step towards moving of this Industry from unorganised to organised structure. Deductions under section 80-IA meant for infrastructure industry, which has been extended to railways.
Infrastructure
Roadways:
Type of Road Expressways National Highways (NH) State Highways (SH) Major District Roads (MDR) Length (in km) 200 70,548 1,31,699 4,67,763 Percentage --2.12% 3.96% 14.08% Number of kilometers added postliberalization 39,901 km. Post-Liberalization Average Growth of NH during each 5 YP is 24.08% A few Vital Stats .. 70% of freight taken by roads NH carries about 40% of road traffic Avg. truck speed in NH 20 to 30 km / hr SH and MDR carries 40% of road traffic Traffic on roads is growing by 7% - 10% Vehicle population 12% growth
Sale of Commercial Vehicles (in lakhs)
26,50,000
33,20,210
79.81%
2 1 0
(Source : SIAM)
Infrastructure
S. No. 1. 2. 3. 4. 5. Name of Project
Development Projects:
Completion of GQ and EW-NS corridors (Phase I and II) 4 -laning of 11,113 km under NHDP Phase-III 2-laning with paved shoulders of 20,000 km of National Highways under NHDP Phase-IV 6-laning of selected stretches of National Highways under NHDP Phase-V Development of 1000 km of expressways under NHDP Phase-VI Construction of ring roads, flyovers and bypasses on selected stretches under NHDP Phase-VII. Total
6.
166
December 2015
2,272
---821 06
NHDP Phase-III
NHDP Phase-V Total
12,109
6500 32939
659
77 10705
1816
953 6283
9624
5470 15951
Out of a total length of 6283 kms under implementation, 4/6 laning has been completed for a partial length of 2130 kms.
Infrastructure
Development Projects:
Major Industrial Regions
Delhi Mumbai Industrial Corridor Delhi-Mumbai Industrial Corridor is a mega infra-structure project of $90 billion with the financial & technical aids from Japan, covering an overall length of 1483 KMs between the Dadri in Delhi and JNPT in Mumbai. This Dedicated Freight Corridor envisages a high-speed connectivity for High Axle Load Wagons (25 Tonne) of Double Stacked Container Trains supported by high power locomotives. Distribution of length of the corridor indicates that Rajasthan (39%) and Gujarat (38%) together constitute 77% of the total length of the alignment of freight corridor, followed by Haryana and Maharashtra 10% each and Uttar Pradesh and National Capital Region of Delhi 1.5 % of total length each.
National Expressway: Target: 15,766 km. Phasing of expressway: 2012, 2017, 2022 Project Cost estimation: >> INR 2.5 trillion Plan for Phase I: 3,530 km (Report from Yahoo News 9th Dec 09) Estimated Cost for Phase I: Rs. 20,000 crore. Lanes: 6 to 8 lanes 11 stretches and 12 states identified
This project incorporates Nine Mega Industrial zones of about 200-250 sq. km., High speed freight line, Three ports, and Six air ports; Six-lane intersection-free expressway connecting Delhi and Mumbai 4000 MW power plant. Several industrial estates and clusters, industrial hubs, with top-ofthe-line infrastructure would be developed along this corridor to attract more foreign investment. Funds for the projects would come from the Indian government, Japanese loans, and investment by Japanese firms and through Japan depository receipts issued by the Indian companies.
Infrastructure Railways:
Passenger traffic / day Freight traffic / day Railway coverage Freights wagons Coaches Locomotives
(as of 2009)
Ore Export 7%
602
667
726
Growth of 8.9%
Infrastructure
Dedicated Freight Corridor Rs. 40,000 crore
Logistics Park: Proposed to set up Logistics Parks at 1. 2. 3. 4. 5. 6. Mumbai area, particularly in the vicinity of Kalyan-Ulhasnagar or VashiBelapur in Navi Mumbai. Vapi in southern Gujarat Ahmedabad area in Gujarat, Gandhidham in the Kutch region of Gujarat Jaipur area in Rajasthan, NCR of Delhi.
These parks are proposed to be developed on Public Private Partnership mode by creating a sub-SPV for the same. Cargo Constituents: ISO containers from JNPT and Mumbai Port in Maharashtra and ports of Pipavav, Mundra and Kandla in Gujarat destined for ICDs located in northern India
POL, Fertilizers, Food grains, Salt, Coal, Iron & Steel and Cement.
Infrastructure
Development Projects:
States Traversed
Eastern DFC (in kms) Punjab Haryana Uttar Pradesh Bihar 102 82 1002 93
Total
1279
Doubling 25%
Total Funds allocated in 11th five year plan: Rs. 77,050 crore
Infrastructure Ports:
No. Traffic Capacity
A few Vital Stats .. *Some 60% of Indias container traffic is handled by the Jawaharlal Nehru Port Trust in Mumbai *It has just 9 berths compared to 40 in the main port of Singapore. *It takes an average of 21 days to clear import cargo in India compared to just 3 in Singapore. *Cargo handling is projected to grow at 7.7% until 2013-14. *Only 43 of the 187 minor ports can handle cargo *Mundra port alone handles 60% of minor port traffic Traffic Capacity Others 17% Coal 13%
12 187
465.7 MT 170 MT
508.6 MT 228.31 MT
(as of 2006-07)
800 MT 300 MT
Development Project: Fertilizer Iron Ore and FRM 18% NMDP (National Maritime Development Programme): 4% Objective: Upgrade and modernize the port infrastructure in India and benchmark its performance against global standards. Total investment for the programme is Rs. 1, 00,339 crore and out of them about Rs. 34,505 crore is expected from the private sector. Allocation Rs. 55,804 crore for port sector. Rs. 44,535 crore for shipping and inland water transport sectors. Project Covers Construction / up gradation of birth, Deepening of channels, Rail / road connectivity projects, Equipment up gradation and modernization scheme, Other related schemes for creation of backup facilities.
Target
No. of Projects
Major Cargo Constituents Express Mail Computers Chips Electronic and Optical Equipment Precision Instruments Perishable food stuff
Share in cargo traffic
2008-09 International
12.1% growth rate in Internatinal cargo 10.1% growth rate in domestic cargo
Development Project: MIHAN (Multi-modal International Cargo Hub and Airport at Nagpur.)
The Cargo hub in Nagpur is built to handle nearly 50% of the total air cargo traffic all over India
Cost: INR 25.8 billion >> Spread over an area of 4025 Hectares >> The airport will have parking space for 50 aircraft at any time with 50 additional bays at fringe areas. >> With a projected target of serving 14 million passengers and handle 0.87 million tonnes of cargo this is one of largest aviation project in India.
Infrastructure
Warehouses:
As per planning commission & industry estimates: Total existing warehousing capacity is 80 million MT out of which CWC has 10.8 million MT and 21.9.million MT in SWC There are three agencies in the public sector which are engaged in building large scale storage/warehousing capacity, namely, Food Corporation of India (FCI), Central Warehousing Corporation (CWC) and 17 State Warehousing Corporations (SWCs). Requirement: Additional warehousing capacity of 35 million MT in next 5 to 10 years at an investment of about INR 6 billion. Current Status: Major investments on these infrastructures have come from Government agencies like CWC, SWC, CONCOR etc. Current private sector initiatives are small and sporadic. Private sector warehousing are of poor quality, small, fragmented and does not meet infrastructure standards. No quality standards or benchmarks are followed in infrastructure creation Developmental Works: IL&FS is working with Continental Warehousing Corporation Ltd to set up six agri parks across India FTWZ Primary objective is to create trade related infrastructure, envisaging world-class infrastructure for warehousing of various products FTWZ addresses these issues effectively as they would enable supply chain / logistics to function much more efficiently by removing the cargo bottlenecks witnessed at the ICDs In addition, such zones are envisaged to provide common infrastructure such as storage and handling equipments, shared storage space, etc. which would enable the apportionment of associated capital costs across a larger base of users leading to significant costs reduction.
Reference: IF&LS
INLAND CONTAINER DEPOTS (ICD) Robust growth of exim trade and capacity constraints in movement and evacuation of cargo has lead to a surging demand for greenfield ICDs and expansion of existing facilities At least 40 to 50 new rail/ road ICDs/ CFS across the country needed to handle the projected traffic in next 5 to 10 years IL&FS is initiating development of ICDs on PPP format with agencies like CONCOR as well as private enterprises with the objective of filling up this critical infrastructure need To create economies of scale, the business plan of ICD is being expanded to include SCM functions like warehousing, C&F (Clearing and Forwarding) and other value added services to give the project shape of Mega Logistics Park
The unplanned development of transport nagars across major industrial townships, metros, mini metros etc. This has led to inefficient utilization of space, shabby infrastructures, road jams and danger to human life
IL&FS has initiated development of integrated and modern logistics cum transport centers across major locations in the country on PPP format The centers will lead to integrated development of warehousing, transportation and traffic planning leading to a much better logistics operations Development of such integrated estates on in Uttaranchal, Chattisgarh, North East and Jharkahnd, in collaboration with respective State Governments
Reference: IF&LS
Manufacturing Industry
16% 14% 12% 10% 8% 6% 4% 2% 0% 15% 3000
2200 1480
6%
605
590
489
Auto
Cement
FMCG
F&B
Impact on the Logistics Sector Cement Industry: Challenge: Road transportation beyond 200 kms is not economical therefore about 55% of cement is being moved by the railways. There is also the problem of inadequate availability of wagons especially on western railways and southeastern railways. Opportunity: Under this scenario, manufacturers are looking for sea routes, this being not only cheap but also reducing the losses in transit. Today, 70% of the cement movement worldwide is by sea compared to 1% in India.
80
60 40 20 0 Steel
Textiles
Auto
Cement
FMCG
F&B
Infrastructure Bottlenecks
Logistics Cost / GDP 13% to 15% 9% 10% 11.4% 13% to 14% Logistics activities performed by 3PL / Logistics activities <10% 57% 30% to 40% 80%
China, India
Emerging Low High
Thats about 40 times jump in market size in a span of 20 years from the current market size of INR 78 billion
55
212.83
10.53
3.16
4.21
Definition of 3PL:
A 3PL provider is a company which supplies /co-ordinates logistics functions across multiple links in the supply chain. The company acts as a third party facilitator between seller/manufacturer (the first party) and buyer/user (the second party).
Suppliers Supplier
Suppliers
Acquire
Convert
Distribute
Distributers
Mngmt
Control
3PL
3PL
Why 3PL ?
Improve focus on core activities Improve return on assets Diverting capital investment Access/ Expansion to unfamiliar market Higher Profitability Increased Sales and Market Share Enhanced Customer Service
Why not?
Inability to respond to changing needs Non compatibility of IT systems
4PL: It acts as single interface between the client and multiple logistics service providers. All aspects of the clients supply chain are managed by the 4PL organisation.
The 4PL organization is often separate entity established as a joint venture or long term contract between a primarily client and one or more partners.
It is also possible for a major 3PL provider to form a 4PL organisation within existing structure.
Key Characteristics: Client 3PL Hybrid organisation formed from a number of different entities Typically established as a JV or long term contract 3PL 4PL
3PL
Challenges:
Unfair Competition Unorganized players get away without paying taxes Dont follow the operating norms stipulated in the motor vehicle act such as quality of drivers, vehicles, volume and weight restriction. Solution / Opportunity: Implies that a truckload loss of Goods is always round the corner. Organized players can cash in by providing the requisite level of safety and insurance cover for goods. Solution / Opportunity: Proposal for implementation of GST. With uniform taxation across all states companies could focus on supply chain efficiency rather than Tax avoidance optimization.
Diseconomies of scale Differential sales tax structure in different states Apart from non-uniform tax structure, LSPs (Logistics Service Provider) have to pay other kinds of taxes like octrois. Governments failure in implementation of VAT since 1st of April 2005
Face multiple check post This delays the process of delivery Compliance with varying documentation requirement of different states is certainly a difficulty. Low IT penetration Lack of communication infrastructure Lack of visibility Lack of real time tracking ability This leads to a lot of uncertainty and lack of transparency in terms of cost structure and service delivery Highly Fragmented Sector LSPs stick to their basic services. They dont provide value added services like packaging / labeling, order processing, distribution, customer support etc.
Solution / Opportunity: Integration of IT into the process like EDI could greatly speed up the whole process and bring in the required efficiency.
Solution / Opportunity: Penetration of 3PL players and high level of investments into technology like GPRS would change the scenario.
Solution / Opportunity: Value Added Services provides a great opportunity to increase the margins.
Solution / Opportunity: The scenario could grossly change with greater penetration of Organized players.
Associated Road Autoriders Intl. Balurghat Tech Broekman Logisti Bulk Cem.Corpn.
Arvind Roadlines
Assam Beng.Carr
Containerway Int
Wilson Sandhu Vins Overseas
T N St Trans Kum
Transport Corp.
Courier
Konkan Rly.Corpn
Elbee Services
Merci Beaucoup ..
National Expressway
Mumbai-Pune Expressway Taj Expressway Ganga Expressway Kundli-Manesar-Palwal Expressway(KMP)
Cost estimation for a 100 km 4 lane expressway - Rs. 1784 Cost estimation for a 100 km 6 lane expressway - Rs. 2548 Funding options including PPP mode, cost sharing by states/ Centre, Commercial utilization of land within/beyond ROW etc. At present expressway handles about 30,000 PCUs and is designed to handle up to 10,00,000 PCUs.
The Uttar Pradesh government is planning five more expressways in the state.
Greater Noida-Saharanpur-Dehradun expressway (in partnership with the Uttarakhand state government)
The five proposed expressways will have a combined length of around 1,400km.
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National Highways
Sr.No.
1 2 3 4 5 6 7 8 9 10
11
12 13 14 15 16 17 18 19 20 21
Himachal Pradesh
Jammu & Kashmir Jharkhand Karnataka Kerala Uttarakhand Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram
1409
1245 1805 4396 1457 2042 4670 4176 959 810 927
32
33
West Bengal
Andaman & Nicobar Total
2524
300 70,548
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KOLKATA
8,693
9,945
10,806
12,596
13,741
58.07
HALDIA
32,567
36,262
42,337
42,454
43,541
33.70
7.53%
PARADIP
25,311
30,104
33,109
38,517
42,438
67.67
13.79%
VIZAG
47,736
50,147
55,801
56,385
64,597
35.32
7.86%
ENNORE
9,277
9,480
9,168
10,714
11,563
24.64
5.66%
CHEENAI
36,710
43,806
47,248
53,414
57,154
55.69
11.70%
TUTICORIN
13,678
15,811
17,139
18,001
21,480
57.04
11.94%
COCHIN
13,572
14,095
13,887
15,257
15,810
16.49
3.89%
NMPT
26,673
33,891
34,451
32,042
36,019
35.04
7.80%
MORMUGAO 27,874
30,659
31,688
34,241
35,128
26.02
5.95%
MUMBAI
29,995
35,187
44,190
52,364
57,039
90.16
17.43%
JNPT
31,190
32,808
37,836
44,815
55,756
57.60
15.63%
KANDLA
41,523
41,551
45,907
52,982
64,893
56.28
11.81%
TOTAL
3,44,799
3,83,746
4,23,567
4,63,782
5,19,159
50.58
10.77%
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EXIM
* Gold,
* Cashew Nuts Major items of exports: Major Exports Industries Petroleum products * manufactures of Metals Textile goods * Machinery and Instruments Gems and jewellary * Cotton raw. Comb/uncombed/waste, * Coal, coke & Briquettes etc. * Pulp and waste paper, * Non ferrous metals, * Organic chemicals, * Machinery except elect. & electronic, * Iron & Steel, * Cotton yarn, fabrics made ups etc. * drugs, pharmaceuticals and fine chemicals * Inorganic Chemicals, * Wood & Wood Products, * Metalifers ors & Metal Scrap,
* Fertilizer crude,
* Electronic goods, * Pearls precious semiprecious stones.
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Major agricultural products include Rice Wheat Oilseed Cotton Tea Potatoes Jute sugarcane
Poultry and diary products Cattle Water buffalo Sheep Goats Poultry Fish
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Major Industries Textiles Chemicals Food processing Steel Transportation equipment Cement Mining Petroleum Machinery Software
Industrial Regions Mumbai-Pune Region, Hugli Region, Major Industrial belts Bangalore-Tamil Nadu Region, .. Ambala-Amritsar .. Middle Malabar .. Adilabad-Nizambad .. Allahabad-Varanasi-Mirzapur .. Bhojpur-Mungar .. Durg-Raipur .. Bilaspur-Korba .. Brahmaputra valley
Gujarat Region,
ChhotaNagpur Region, Vishakhapatnam-Guntur Region, Gurgaon-Delhi-Meerut Region, Kollam-Thiruvantapuram Region.
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