Distribution Logistics in India

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DistributionLogistics in India

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Abstract

Distributionlogistics consists of different types of activities. All these mainlyfocus on achieving efficient movement and distribution of goods orfinished goods, products. It takes products from the production lineend to reach customers. Business and companies in India for decadeshave ignored the importance of logistics sector that is still themost underinvested sectors in India. Evenwith the promising growth in the distribution logistics in India,there are myriads of challenges that the logistics industry in Indiacurrently faces. Distribution logistics is still a nascent as well asthe disjointed industry in India. While it is projected thatoutsourced distribution logistics constitutes about 60% of totaldistribution logistics expenditure in India, systematized playersonly have 10% of the share.

Keywords:Distribution logistics, transportation, warehousing, GDP, orderfulfilment, freight, cargo, consignments, products, goods.

Distributionlogistics consists of different types of activities. All these mainlyfocus on achieving efficient movement and distribution of goods orfinished goods, products. It takes products from the production lineend to reach customers (Fleischmann, 2012). In addition, distributionlogistic offers many different sets of optimization tools andmethodologies. Besides, these are employed in three areas includingorder fulfillment, warehouse management, and transportationmanagement (Fleischmann, 2012).

Dueto the advantages associated with it, distribution logistics hasfound its application in India. India is among the nations with thefastest growing economies and soon becoming first world countries.However, the distribution logistics in India is still in its buddingstage and experiences numerous challenges that require urgentsolutions .Therefore, in order to manage its finished productseffectively and ensure that these goods reach the end consumers intime and efficiently, India had to embrace the distributiontechnique. To provide an overview of the three main areas wheredistribution logistics finds its application, this paper will brieflydiscuss the use of this concept in the three mentioned areas.

OrderFulfillment

Theconcept of distribution logistics helps companies and businesses toredesign, restructure its processes and customer serviceorganizations Fleischmann, 2012). It also takes care of client’sorders and questions. This will guarantee that the local customer orcustomer’s central organization is consistent with their objectivesand goals. examples of the modules included in business goals arebusiness strategy, performance goals, and market expectations. Fromtaking orders to dispatching the merchandise, distribution logisticsalso concentrates on transaction reliability, transaction efficiency,process throughput time, and accurate and timely internal andexternal communication of information (Fleischmann, 2012).

WarehouseManagement

WarehouseManagement is also an important area of proficiency in distributionlogistics. It involves putting the focus on communication betweenphysical warehouse infrastructure and product stations, trackingsystems. In addition, it is associated with the storage as well asthe receipt of merchandise in various locations. It includes crossdocking, inbound warehouse and outbound distribution managementcenters (Fleischmann, 2012).

Itagain focuses on offering private conveyance and value addedservices. This comprises manufacturing processes, sequencing, andkitting (Fleischmann, 2012). Facilities are likewise used with agreat pursuit and effort for continuous improvement. It willultimately lead to facility cost reduction, space requirementdecrease, and the stability of the overall chain supply. Besides,services are improved with an operational excellence culture.

Awell-planned warehouse can provide many benefits. Such warehouse willoptimize the efficiency of the workforce as well as increase thethroughput time. In addition, it will improve material handlingequipment. This will again help customers to delineate theirwarehouse business and incorporates the needed information system aswell as physical structure support (Fleischmann, 2012).

TransportationManagement

Distributionmanagement is similarly linked to bringing discipline and processesto transportation management. It is normally done effectively usingdatabase of partner carriers. Besides, it allows organizations todevelop strong optimal transportation method for their commercial.Transportation management mainly focuses on handling inbound,outbound, as well as internal transportation. It guarantees thatcustomers will benefit from visibility, stability, as well as controlof their transport functions and costs (Fleischmann, 2012).

Inaddition, transportation management focuses on main carrier programs.It also handles the level flow of necessities for transportation andtransportation network design. Its inexorable concentration oncontinuous improvement will last lead to services of high quality,overall expense reduction, and transportation optimization. The mainobjective of this paper will discuss distribution logistics in Indiawhile looking at the three areas that is transportation management,order fulfillment, and warehouse management (Fleischmann, 2012).

DistributionLogistics in India

Businessand companies in India for decades have ignored the importance oflogistics sector that is still the most underinvested sectors inIndia (Cai &amp Xiao, 2011). While distribution logistics undertakethe key role of connecting the consumptions markets and productioncenters, its poor management can result in a serious disruption inthe whole supply chain network. In India, distribution logistics isat its development stage, and this has led to huge losses duringdistribution, transportation, and storage of goods. Distributionchannels refer to alleyways along which products or goods travel frommanufacturers and producers to ultimate consumers, routes along whichinformation, finance, and information flow (Fleischmann, 2012). Whilesome manufacturers and producers deal directly with consumers, mostproducers utilize distribution channel to take products to consumers.The creation of a distribution channel requires a significant effort,investment, and thought (Cai &amp Xiao, 2011).

Indiahas a total population of over 1-billion people with a current yearlyGDP growth of 9% thus making a key player in the economy of the world(Greg Knowler, 2015). It is believed that by 2050, India will becomethe third-largest economy in the world after the United States andChina (Greg Knowler, 2015). The economic prowess of India is drivenby the purchasing power of the ever-increasing middle class as wealthprogressively dribbles down to the bottom of the economic pyramid.Because of this fast growth, domestic industries are in a rushagainst time to increase capacity and production as well as createmarket access through distribution channels. Among the sectorbelieved to contribute to this demand is the fast moving consumergoods industry with retail sales expected to be over $50 billion by2017 (Ltd, 2016). Fastmoving consumer goods include various type of products such astoothpaste, cosmetics, soap, toiletries, detergents, and shavingcream. Multinationals with notable fast moving consumer goodspresence in India include Cadbury, Procter and Gamble, Unilever, andNestlé (Cai &amp Xiao, 2011).

Formany years, the distribution channel structure in India has beenlargely traditional and unique. However, with the country realizingthe importance of logistics, distribution logistics is graduallyreplacing the traditional distribution channels (Cai &amp Xiao,2011).

Logisticsis indeed the backbone of any given economy, offering cost effective,efficient flow of goods on which other industry sectors depend. Thelogistics industry including distribution logistics in India isevolving quickly. It is the interplay of technology, infrastructureas well as new forms of service providers, which will establishwhether the industry can assist its customers to minimize thelogistics costs and offer effective services. Despite weak economicsentiments, the distribution logistics industry in India continue toexperience notable growth mainly because of gradual growth ine-commerce, manufacturing, and retail sector. By 2020, it isanticipated that the logistics market in India will grow at a rate of12.7% driven by the gradual growth in retail, fast moving consumergoods, e-commerce sectors, and retail (Ltd,2016).

Indiacurrently spends about 14.4% of its GDP on transportation andlogistics as compared to other developing nations, which spent lessthan 8% of their GDP on logistics (Cai &amp Xiao, 2011). It isexpected that by 2020, the 3Pl logistics market in India will bevalued at US$301.89 billion (Cai &amp Xiao, 2011). Warehouse marketin India will grow at 10%, while freight forwarding market will growat 12% until the year 2020 (Greg Knowler, 2015). The growth rate ismainly attributed to the fact that, the Indian government willrapidly implement the GST regime. This will enable the logisticscompanies to optimize their operations thus minimizing cost as wellas increasing their returns. With the GST implementation, thelogistics companies including distribution logistics, which now arecompelled to create many small warehouses across many cities can justset up a few, large warehouses region wise and follow the model ofhub-and-spoke for the movement of products from warehouse to thevarious manufacturing plants, various POS, retail outlets andwholesale outlets. In addition, the boom in the expansionary policiesof the fast moving consumer goods companies and e-commerce sectorshas contributed largely to the current growth in the distributionlogistics in India. This has increased the services of thedistribution logistics firms. However, they must meet therequirements of quick delivery as well as strong service levelagreements (Bureau, 2015).

Empiricalevidence reveals that the distribution logistics in India grows atabout 2-times the GDP growth (Bureau, 2015).Besides,infrastructural bottlenecks that mute the logistics sector growth andincreases inefficiency are currently being addressed by thegovernment. Construction of dedicated rail cargo corridors willpromote efficient transportation of containerized freight by rail.One major benefit of dedicated cargo corridor are that the cargotrains could be run on timetables just like in passengers’ trains,and theoretically, the frequency can be increased to one train in tenminutes (Bureau, 2015). As a result, the transportation time of goodsbetween Delhi and Mumbai, for instance, can be reduced to 18 hoursfrom the current 60hrs.

Keylogistics Players in India (Bureau, 2015).

WarehousingSector

Warehousingsegment in India constitutes about 15-35% of the total logisticcosts, and hence, India cannot ignore its importance with the role itplays ensure that supply chain network functions smoothly (CreditAnalysis &amp Research Limited (CARE Ratings)., 2016).Just few years ago, warehousing industry in India was quitedisorganized. However, the industry has evolved from mere mortar andbrick shelters for the purpose of goods storage to very sophisticatedstockrooms in which with the help of advanced tracking systemmethods, every consignment can easily be tracked on a real time basisat the click of the button. With the introduction of distributionlogistics in India, there has been increased hi-tech facilities haseliminated the herculean task for industries to ship as well asdeliver consignments and cargos to designated stations and has led tothe rise of the e-tail in India (CreditAnalysis &amp Research Limited (CARE Ratings)., 2016).Distribution logistics is now employed mostly in the manufacturingsector to help them distributes goods effectively and on time.However, with the spread of lean manufacturing, substantial parts ofwarehousing including scheduling, labelling as well as package arebeing outsourced to third party distribution logistics providers.However, the warehousing inducting is growing up with the help oftechnology.

Transportationsegment

Thetransportation in India contributes to about 60% of distributionlogistics in India, which consists of different means includingwater, rail, air and road (CreditAnalysis &amp Research Limited (CARE Ratings)., 2016). The distribution through rail and road jointly contributes toapproximately 56%, and then warehousing is about 25% comprisingagricultural and industrial storage in the whole pie of distributionlogistic segment. For the last 5-years, the Indian government hasbeen taking numerous initiatives to develop road and railinfrastructure (CreditAnalysis &amp Research Limited (CARE Ratings)., 2016).Thetotal road projects increased to about 4368km in 2016 from 3250km in2012. The budget for railway development for 2016/2017 was pegged atRs at Rs.1.21 lakh core. There is now much focus on the expansion ofcargo business to take up cargo corridors. East-West linking Mumbaiand Kharagpur, East Coast linking Vijayawada and Kharagpur, andNorth-south linking Chennai and Delhi. Besides, various initiativesincluding capacity-building plans, establishing broad gauge lines,and enhancing the customer interface through information technologysystems to offer services of improved quality have been taken up. The existing ports are being revived and upgraded by the Indiangovernment. All these are aimed at promoting distribution logistics(CreditAnalysis &amp Research Limited (CARE Ratings)., 2016).

Challengesthat Faces

Evenwith the promising growth in the distribution logistics in India,there are myriads of challenges that the logistics industry in Indiacurrently faces. Distribution logistics is still a nascent as well asthe disjointed industry in India. While it is projected thatoutsourced distribution logistics constitutes about 60% of totaldistribution logistics expenditure in India, systematized playersonly have 10% of the share (GregKnowler, 2015).In road transportation, which contributes to the largest ratio ofdistribution logistics spending, about 74% of the operators are minorplayers with only one truck. In outsourced warehousing, about 92% ofplayers come from shambolic sector (GregKnowler, 2015).Even among the organized distribution logistics players, only a fewhave offerings across various means (road, rail, air, and road) andservices (warehousing, transportation, as well as value-addedservices including packaging, customer clearance, and cold chain)(Ltd, 2016).

Inadequateinfrastructure, as well as complex regulations and taxations, are bighurdles to the growth of distribution logistics in India. Forinstance, most domestic airports lack adequate freight terminalfacilities. Blue Dart, the Indian leading express logistic player,created in 1983 and that is currently owned by the world player DHLbegan freight airline operations in 1996. In nearly all airports inIndia, Blue Dart operates from the same space originally provided toit by the airport management. In distribution logistics business,turnaround time is imperative. If the logistics company lacks theright facilities regarding site and size within an airport, itbecomes a serious challenge and impediment to the growth of thebusiness. Blue Dart Company is the only logistics player in thiscountry with dedicated cargo aircraft, which are seven in number.Other logistics companies mainly to the belly space in passengerairlines, a practice that Blue Dart does from time to time based onthe load (Ltd, 2016).

Movingfreight by roads has myriads of problems. National highway in Indiaconstitute about 2% of the road network in India however, theyhandle over 40% of road cargo traffic. This automatically results intraffic jams thus compromise the transportation speed. Complexregulatory requirements, as well as cumbersome paper work anddocumentation, also jeopardize speed. Averagely a commercial vehiclein India travels at a speed of 32.18 km/hr. In the United States andWestern Europe, the average of a commercial vehicle is 96.56 km/hr.(Ltd, 2016).

Besides,the tax system of India is very complex. In an effort to avoidtaxation, companies in India usually own warehousing operations ineach state. This has led to a huge number of small warehouses acrossthe nation that have not streamlined storage processes andtechnologies as well as fail to provide economies of scale (Ltd,2016).

Conclusion

Infrastructureconstraints, as well as disorganized approach, have led tounconducive policies and preventable hurdles. What India requirescurrently is integrated logistics planning. The planning issue withIndian distribution logistics is a lack of an ecosystem stance inattracting investments, creating stakeholder groups, and buildingfacilities. Even with these challenges, the distribution logistics inIndia is gradually growing. Distribution logistics is the best waythat India can employ to distribute its manufactured goods to itsconsumers. Distributions logistics comes with numerous benefits forbusiness especially when utilized optimally in a merchandisedispersion method. Among the benefits it can provide to India,include the following (Fleischmann,2012):

  • Helps to identify every cost element, which is related to the Indian products movement

  • Aids in forming sales analysis for marketing planning

  • Assists to offer order fulfillment flexibility employing consummate resources for single and multi-site operations.

  • Facilitates the analysis of demand for renewal planning

  • Enables easy tracking of merchandise from its source to the current location

  • Provide an organized system for shipping that helps in cost and time-saving

References

Bureau,F. (2015). Logisticsset for rapid&nbspgrowth.TheFinancial Express.Retrieved 12 October 2016, fromhttp://www.financialexpress.com/economy/logistics-set-for-rapid-growth/54736/

Cai,G. &amp Xiao, J. (2011). Optimization of E-commerce LogisticsDistribution Center Location. ContemporaryLogistics,59-63. http://dx.doi.org/10.5503/j.cl.2011.03.010

CreditAnalysis &amp Research Limited (CARE Ratings).,. (2016). IndianLogistic Industry gaining the traction.Retrieved 14 October 2016, fromhttp://www.careratings.com/upload/NewsFiles/SplAnalysis/Indian_logistics_Industry_gaining_the_traction.pdf

Fleischmann,B., &amp Klose, A. (2012). Distributionlogistics: Advanced solutions to practical problems.Berlin: Springer-Verlag.

GregKnowler, S. (2015). Distributionissues hold back India’s e-commerce business.Joc.com.Retrieved 12 October 2016, fromhttp://www.joc.com/international-logistics/distribution-issues-hold-back-india%E2%80%99s-e-commerce-business_20141204.html

Ltd,R. (2016). LogisticsMarket in India 2015 – 2020 – Research and Markets.Researchandmarkets.com.Retrieved 12 October 2016, fromhttp://www.researchandmarkets.com/reports/3232004/logistics-market-in-india-2015-2020

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