INDIAN LOGISTICS INDUSTRY

MAVERICKS

Indian Logistics Industry

Mavericks

Table of Con

TABLE OF CONTENTS

1. INTRODUCTION ....................................................................................................... 3
2. MAJOR CONTRIBUTOR.......................................................................................... 4
3. GROWTH DRIVERS.................................................................................................. 5
4. KEY TRENDS.............................................................................................................. 6
5. COMPETITIVE LANDSCAPE ................................................................................. 7
6. SURVEY REPORT ..................................................................................................... 8
7. CONCLUSION .......................................................................................................... 10

Indian Logistics Industry

Mavericks

Introduction
India has experienced fast-paced growth over the last decade. Though the growth has
primarily come from the services sector, manufacturing and exports have also risen
reasonably. Logistics as a function is being increasingly outsourced by manufacturers.
However, the Indian logistics sector in many ways still lags behind the global standards
of performance. Since 1990s, the transportation infrastructure has undergone a
significant change. While in the 90s, the demand for transport grew at an annual rate of
10%, in the last decade the demand in the transport and logistics industry grew along
with the accelerating Indian GDP. This growth increased the demand for practically all
transport services, like road, rail, air and water. In India cost around 14.4% of GDP,
compared to 10% in the US, 18% in China, 15.20% in Thailand and 11% in Japan.
These numbers clearly show that how much a country relies on the logistics and how
big is the role and contribution of logistics in the GDP of the countries. The
transportation alone cost around
41% of the whole logistics cost.

The Indian logistics industry is

worth $288bn in 2015 which is
expected to grow by $511bn
by the year 2020 which is
almost 12.17% growth

Cost of Logistics can be categorized as: -

Transportation: Transportation cost accounts for about 41% of the total cost of logistics.

Inventories: Inventories covers around 25% of the total cost of logistics.

Packaging: Its value is around 11% of the total cost of the logistics

Material handling and warehousing: it cost around 9% of the total logistics cost.

Indian Logistics Industry

Mavericks

"You will not find it

difficult to prove that
battles, campaigns,
and even wars have
been won or lost
primarily because of
logistics."
-Dwight D. Eisenhower

MAJOR CONTRIBUTOR
Transportation has the major contribution in the logistic industry.
It includes the transportation of raw material to the organization
for the production, transportation of finished and unfinished
goods to the warehouse and also the transportation of products
to the end users. So transportation comes in almost every stage of
the production and distribution of goods.
There are various modes of transportation are:
1. Road: Roadways has the maximum contribution of 57% of
the total transportation and also generates the maximum
revenue of 47% of the total cost of logistics.
2. Rail: Other than roadways, railway has the major
contribution in the transportation of 36% and generates
15% of the total revenue from logistics.
3. Waterways: Around 6% of the total transportation is done
through the waterways.
4. Airways: 1% of the total transportation is done through
airways which is the least among the all mode of
transportation.

Indian Logistics Industry

Mavericks

GROWTH DRIVERS
Rapid industrial growth: Rapid growth in industries such as automobiles, pharmaceuticals,
fast-moving consumer goods (FMCG) and retail has significantly increased the demand for
movement of consumer and capital goods across the country, from entry ports to
manufacturing or distribution locations or from manufacturers and distributors to consumers
and exit ports.
Growth in GDP: The volume of freight traffic is positively related to the GDP of the
country. Therefore, as the GDP increases, the volume goods movement is expected to
increase through all modes. During the period from 2007-2012, the agriculture and
manufacturing GDP have increased from US$ 263.6 billion to US$ 290.7 billion at constant
prices. The corresponding increase in freight traffic was from 1.3 trillion tone kilometers
(TTK) to 2.1 TTK.
Globalization: With the growing integration of Indias economy with the world, the
countrys total trade has grown at a CAGR of about 20 per cent from US$ 57 billion in 199798 to US$ 862 billion in 2012-13.
Government initiatives: The Government of India has initiated several policy measures and
programs to attract investments in developing the logistics infrastructure of the country.
Some of the key reforms undertaken by the Government of India include the following:
FDI regulations: The government allows 100 per cent FDI under the automatic route for all
logistics services, except air cargo and courier services. For air transport services including
air cargo services, the limit was increased from 49 per cent to 74 per cent in 2008. Also, FDI
of up to 100 per cent is permitted for courier services, subject to Foreign Investment
Promotion Board (FIPB) approval.
Greater investments in development of logistics infrastructure: The government has
significantly increased the investment allocated for the development of logistics
infrastructure including ports, airports, national highways, logistics parks, freight stations and
corridors.
Private sector partnerships: Several measures have been undertaken by the Government of
India to encourage private sector participation in the logistics industry across all modes.
These measures include increasing targeted contributions of private players in the
investments set aside for the development of logistics infrastructure, tax exemptions and duty
free imports. Apart from speeding up capacity creation, this is also aimed towards
incorporating latest technologies and better management practices.
Streamlining indirect tax structure: The introduction of the Goods and Services Tax (GST)
is expected to significantly bring down the total costs of the logistics industry. At present,
most companies have set up multiple small warehouses of size 4,000-10,000 sq ft across the
country to save taxes on inter-state movement. But with the implementation of GST, the need
to have several small warehouses is likely to be mitigated in favors of larger and consolidated
warehouses at strategic locations.

Indian Logistics Industry

Mavericks

KEY TRENDS IN LOGISTICS INDUSTRY

Green Logistics: Green logistics describes all attempts to measure and minimize the
ecological impact of logistics activities. This includes all activities of the forward and
reverse flows of products, information and services between the point of origin and the
point of consumption. It is the aim to create a sustainable company value using a
balance of economic and environmental efficiency..
Asset-light: Asset-light models can deliver a better return on assets, lower profit
volatility, greater flexibility, and higher scale-driven cost savings than asset-heavy
models.
Modernising Infrastructure: India need to invest in infrastructure to get hold of the
growth in logistic industry.
Talent Retention: The ability of an organization to retain its employees.
Cultural Adaptability: It is an individuals willingness and ability to adapt to the
manner of communicating, motivating, and managing, across various countries and
cultures.
Information technology: The growing complexity and dynamism of supply chains
requires increasingly advanced Information Technology solutions.
3PL Consulting: Manufacturers continuously search for supply chain innovations and
gains through partnerships with 3PL logistic service providers.
Complexity: Supply chains are becoming increasingly complex and dynamic with
sourcing locations being changed increasingly quickly and purchase orders becoming
smaller and more frequent.

Indian Logistics Industry

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COMPETITIVE LANDSCAPE

The Indian Logistics Industry is highly fragmented. The top-10 listed players have only about
2 per cent share in the overall market3. The top three companies in terms of sales turnover are
Container Corporation of India, Transport Corporation of India and Blue Dart Express.

Indian Logistics Industry

Mavericks

SURVEY RESULTS

We undertook a survey with a sample population of 182, these were the results of the survey

COLLECTED DATA
Gender- 60.1 % of the participants were males and 39.9% were females.
Age category- most of the participants are in the age group 20-29, followed by the age group
13-19 which constitutes 11.2 %.
Courier preferred- Blue dart is the most preferred by the participants followed by DTDC
courier.

Indian Logistics Industry

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Logistics used to send confidential document- when the participants need to send any
confidential document, they prefer the highly reliable ones though it maybe expensive. they
do not go for the cheaper or nearer ones. 47.5 % of the participants believes in sending the
confidential document via highly reliable but expensive logistics.
Logistics used to send a less expensive material- when the participants need to send a less
expensive material, they prefer the one nearer to their place. in this case, they do not go for
the expensive ones. 47.2 % of the participants sends a less expensive material through the one
nearer to their place.
Logistics used to send an expensive material- when the participants need to send an
expensive material, they prefer the highly reliable ones with high expenses. also they prefer
the ones with transit insurance. 41.8 % prefer highly reliable one but expensive and 41.2 %
prefer the ones with transit insurance.
Main focus for selecting logistics player- they prefer a logistic player because of their
reliability followed by the delivery speed. 48.6 % of the participants select a logistic player
because of reliability.
Revenue increase due to e-commerce sector- 86.3% of the participants believed that the ecommerce sector has increased the logistics revenue. this shows the importance of ecommerce sector in the growth of logistics industry.
e-commerce sector in logistic business- 83.5 % of the participants believes that the
established e-commerce co. like Flipkart should start its own logistics network. this would
make the delivery fast and would be less costly.
Logistic companies to start e-commerce wing- 62.9 % of the participants wants an
established logistic company like DTDC to start its own e-commerce wing.

ANALYSIS OF THE SURVEY

For Confidential goods, majority preferred the reliable Logistic provider.

People Choose Logistic players based on their reliability.

86.3% believe that e-commerce increased the logistics revenue.

83.5% believe that e-commerce firms should start their own logistics

Indian Logistics Industry

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CONCLUSION
India has become the prime destination for logistics service providers all over the world. The
demand for logistics services in India has been largely driven by the remarkable growth of
the economy. The growth is being projected at 9-10 per cent in next few years, with the
CAGR (compounded annual growth rate) expected to grow at a rate of 7-8 per cent. This
growth is expected to gain greater momentum due to the exponential growth of the Indian
economy. India is also experiencing a big retail boom as the buying capacity of the middle
and upper middle segment of the population has scaled new heights. Many large
multinationals from the retail industry are planning to set up operation in India and large local
retailers are also planning to expand their operations.
But with the infrastructure largely under-developed and incapable of catering to a growing
economy, logistics management in India becomes too complex. The poor condition of
infrastructure directly translates to higher turnover, pushing up the operating costs and
reducing efficiency. There are other problems such as complex regulatory compliance and
limited adoption and utilization of technology, which has resulted in increased paperwork and
inability to communicate effectively with customers.
In spite of dismal infrastructural scenario, the hopes of the logistics sector are kept up by the
various upcoming infrastructural projects like logistics parks and hubs and other initiatives by
public and private sector. The future of the logistics sector depends not only on the continued
development of infrastructure but also on the capability of the service providers in adapting
themselves and making optimal utilization of technology.

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