Sandeep Kumar Singh SCM Assignment(GATI Ltd)

11/9/2012

An Overview about the Indian Logistic Industry: The Indian logistics industry is likely to continue its growth momentum in 2011 as in the previous year and the sector is forecast to witness a consolidation wave in the coming months in view of the reviving fortunes of the sector with booming end-user industries. In 2010, the Indian logistics segment accounted revenues of about $ 82.10 billion, witnessing a growth of about 9.2 percent over the previous year, driven by strong growth of key manufacturing industry sectors. For the era 2010-2020, the Indian logistics market is likely to witness consistent annual growth of around 8-9 percent and reach to the revenue level of about $190-200 billion by 2020. This target will be achieved with the help of steady growth of the economy and major industries like engineering, pharmaceuticals, automotive, food processing and others. The components of the logistic cost are as follows:

10% 40%

24%

Transportation Warehousing

26%

Growth Drivers of the Industry: Increase in private participation of rail freight Setting up of special economic zones (SEZs) resulting in increased trade Privatisation of inland container depot (ICD) for sea freight Airport expansion with dedicated cargo terminals Improved road infrastructure with better connectivity Foreign direct investments (FDI) in the commercial vehicle segment leading to usage of better quality vehicles Revision of import duty for fast moving consumer goods (FMCG) Bilateral agreements to promote export-import (EXIM) trade Huge investments in the infrastructure sector which would increase the efficiency and productivity of the transport system resulting in lower transit times.

 Changes in Govt. Policy: The proposed introduction of GST are expected to significantly reduce the number of warehouses manufacturers are required to maintain in different states, thereby resulting in a substantial increase in demand for integrated logistics solutions. Globalization of manufacturing systems: Globalization with advancements in technology are increasingly compelling companies across verticals to concentrate on their core competencies and avail the cost saving potential of outsourcing. Excellent trade growth: Strong economic growth and liberalization have led to considerable increase in domestic and international trade volumes over the past five years. Competitive dynamics and other issues: The following problems existing in the Indian logistics industry make it unattractive for investments and also create entry barriers. Logistics is a high-cost, low-margin business. The problem of organized players is compounded by unfair competition with unorganized players, who can get away without paying taxes and following operating norms stipulated in the Motor Vehicles Act such as quality of drivers and vehicles, volume and weight restrictions, etc. Economies of scale are absent in the Indian logistics industry. Even the organized sector that contributes slightly more than 1% of the logistics cost, is highly fragmented. Existence of the differential sales tax structure also brought in diseconomies of scale. Apart from the non-uniform tax structure, Indian LSPs have to pay numerous other taxes, octrois, and face multiple check posts and police harassment. High costs of operation and delays involved in compliance with varying documentation requirements of different states make the business unattractive. The infrastructure facility is not comparable to the developed countries or some of the developing countries. Though the country has developed the largest road networks in the world but these are not proper maintained and out of them very less accounted for express highways. The trucking industry in India is largely fragmented and in the hands of small truck operators. Estimates suggest that nearly 70% of the truck owners in India own between 1-5 trucks which results in overloading to recover investments. Problems relating to port: 70% of seaborne trade is managed by 2 of its major ports while the others ports are largely under-utilized.

Competitors of Gati: Among the key players of the Indian logistics industry there are certain international names along with national companies that are not only world leaders in the field but are also part of the Indian industry for a long time now.

DHL

A very commonly known name in the Indian logistics industry, DHL has been part of the industry for a long time now. Established in San Francisco in the 1969 DHL has grown across 220 countries with over 300,000 employees. It has built a reputation over the years as a responsible logistics support air, ocean, express freight and overland transport, contract logistics solutions. This is an international brand that has been a part of the Indian market also. Established at Netherlands, TNT is a reliable name in the arena of international transportation and distribution business. Spread across 200 countries it has an estimated revenue turnover of $ 3,500 billion US dollars.

TNT

AFL

This is one of well known international players in the logistics industry of India. The main areas of service by the company are in the area of logistics and warehousing along with Courier Company and custom consultant. BLUE This is one of the premier companies in the field of logistics. The company DART has a huge network linked with the most advanced communication systems. Blue Dart handles large and oversized packages and stands for an overnight delivery of such goods. DTDC Company spreads over 3700 locations within India and 240 international places. The company is a leading name in low cost shipments along with timely delivery. ASHOK This is an established name in the manufacture of trailer trucks and heavy LEYLAND vehicles in India. It has come up with a new venture in Ashley Transport Services Ltd. in the area of information exchanges and the business of freight contractors along with integrated logistics services. FIRST FLIGHT This is an Indian company that has domestic, international and many other programs of multi tracking technologies.

What Gati is doing to survive the competition in the logistic industry faced by the above competitors?? Transition from a 3PL provider to a Supply Chain management Company. Evolve through diversification into related fields that aim at increasing customer profitability

 Focus on key Customers for delivery of solutions o ( Including Multi-Nodal Transport Solutions) Value Added Services apart from transfer of stock o Stocking & Warehousing

o Assembling, Packaging & Labeling Integrated Supply Chain Solutions

Gati v/s Bluedart:

40 30 20 Percentage 10 0 -10 -20 -30 2009

20.49
11.95

YOY Top Line Growth

26.75 20.48 20.86 29.82

Gati
2010
-7.10 -22.51

2011

2012

Analysis of Balance Sheet: Sales of GATI has increased over the last three years, with Rs. 79041 lakhs in 2008-09 to Rs. 92611 lakhs in 2009-10 to Rs. 120,298 lakhs showing that GATI has done well in the recent years. Not only the sale but the profit has also increased significantly over the years with a loss Rs. 1,761 lakhs in 2008-09 to a profit of Rs. 2,373 lakhs in 2010-11 showing a significant increase in the operational efficiency of the organization. GATI has also declared dividends showing a positive trend and ensuring the shareholders of their capital in the company. GATI Competitive Advantage:

 Largest Intricate, unmatched distribution network in the country Hub and spoke model with over 4000 vehicles served by 17 express distribution centres and 64 warehouse distribution centres in India First to introduce 3PL services in India with ISO-9001 Quality Certification Partners and customers system integration for seamless data transfer Technologies GATI Entreprise Management System