PROJECT REPORT ON

INDIAN LOGISTICS INDUSTY :

THE NEXT BIG GROWTH DRIVER

BACHELOR OF MANAGEMENT STUDIES SUBMITTED BY

PANDIT AJAY KUMAR

SUBMITTED TO

UNIVERSITY OF MUMBAI

SAKET COLLEGE OF ARTS ,SCIENCE AND COMMERCE

ACADEMIC YEAR 2012-2013

CERTIFICATE

DECLARATION

DECLARATION

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

INTRODUCTION TO LOGISTICS

Logistics is the key foundation upon which other economic sectors depend and consumer demands are met
Logistics is the management of the flow of resources between the point of origin and the point of destination in order to meet some requirements, for example of customers or corporations. The resources managed in logistics can include physical items such as food, materials, equipment, liquids, and staff as well as abstract items such as information, particles, and energy. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security. The complexity of logistics can be modeled, analyzed, visualized, and optimized by dedicated simulation software. Minimizing use of resources and time are common goals.

Logistics, as a business concept, evolved only in the 1950s. This was mainly due to the increasing complexity of supplying one's business with materials, and shipping out products in an increasingly globalized supply chain, calling for experts in the field who are called Supply Chain Logisticians. This can be defined as having the right item in the right quantity at the right time at the right place for the right price and to the right target customers (consumer); and it is the science of process having its presence in all sectors of the industry

Logistics primarily deals in transportation and storage operation and is significantly aided by value added services

ORIGIN AND DEFINATION OF LOGISTICS:

The term "logistics" originates from the ancient Greek "" ("logos" "ratio, word, calculation, reason, speech, oration"). Logistics is considered to have originated in the military's need to supply themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, there were military officers with the title Logistikas who were responsible for financial management and distribution of supplies. The Oxford English dictionary defines logistics as: The branch of military science relating to procuring, maintaining and transporting material, personnel and facilities." However, the New Oxford American Dictionary defines logistics as "the detailed coordination of a complex operation involving many people, facilities, or supplies" and the Oxford Dictionary online defines it as, "the detailed organization and implementation of a complex operation:" ] Another dictionary definition is "the time-related positioning of resources." As such, logistics is commonly seen as a branch of engineering that creates "people systems" rather than "machine systems".

IMPORTANCE OF LOGISTICS

Logistics is the bed rock of trade and business: - Without selling and or buying there can be no trade and business. Buying and or selling takes place only when goods are physically moved into and or away from the market. Leads to customer satisfaction through superior customer service:Organizational objectives of P [Productivity],Q [Quality],C [Cost],D [Delivery],E [Employee Morale],F [Flexibility],S [Safety],H [Health],E [Environment] are set to meet customer expectations of Q,C,D. Q, C, S, H, E is parts of must be quality that a customer expects. Logistics addresses D, F objectives which lead to customer satisfaction through superior customer service Integrates logistical activities: - In conventional management environment, various activities of logistics work in isolation under different management functions. Competitive edge: - In the fiercely competitive environment logistics provides the edge. Due to technological revolution most of the products are moving into commodity markets. Logistics wins or loses wars: - British lost American war of independence due to poor logistics. Supports critical functions like operations and marketing: - Strong logistics support enables a company to move towards JUST IN TIME production system for survival in a highly competitive market. Logistical costs: - For individual businesses logistics expenditures are 5% to 35% of sales depending on type of business, geographical areas of operation, weight/value ratios of products and materials. This is an expensive operation. Improvement in the efficiency of logistics function yields savings as well as customer satisfaction.

Subdivisions of logistics management Business Logistics Procuring, moving and storing of R/M and transporting, warehousing and distribution of F/G.

Facilitation of relevant manufacturing and marketing. Making finished goods available to the customers in the market. Procuring, moving and storing of agricultural products. Providing competitive edge in commodities market Event Logistics :- The net work of activities, facilities and personnel required to organize, schedule and deploy the resources for an event to take place and to efficiently withdraw after the event Service Logistics :- The acquisition, scheduling and management of the facilities/assets, personnel and materials to support and sustain a service operation Military Logistics: - Design and integration of all aspects of support for the operational capability of the military forces [deployed or in garrison] and their equipment to ensure Readiness, reliability and efficiency. Third-party Logistics: - Third-party logistics involves the utilization of external organizations to execute logistics activities that have traditionally been performed within an organization itself. According to this definition, third party logistics includes any form of outsourcing of logistics activities previously performed in-house. Example: - A company with its own transport facilities decides to employ external warehouse specialist, this would be an example of third party logistics. Production Logistics: - The term is used for describing logistic processes within an industry. The purpose of production logistics is to ensure that each machine and workstation is being fed with the right product in the right quantity and quality at the right point in time. Production logistics is getting more and more important with the decreasing batch sizes. In many industries (e.g. mobile phone) batch size one is the short term aim. This way even a single customer demand can be fulfilled in an efficient way. Track and tracing, which is an essential part of production logistics .

An Overview

The Logistics Industry

Globally, the logistics industry is valued at US$ 3.5 trillion. The U.S., which contributes to over 25% of the global industry value, spends close to 9% of its GDP on logistic services. The Indian Logistics Industry is presently estimated at US$ 90 billion. The industry has generated employment for 45 million people in the country in comparison with the IT and ITeS sector which employs approximately 4.3 million people. It is forecast to grow at a Compound Annual Growth Rate (CAGR) of approximately 8% over the next three to five years. (CII) Third Party Logistics (3PL) Solutions, is slated to grow at a compound annual growth rate (CAGR) of over 16% from 2007-10. Consequently, 3PL service providers are expected to corner an increased share of the Indian Logistics pie, from 6% in FY06 to 13% in FY11, at a CAGR of 25% (CII). The primary growth drivers of this industry are as under: o Investments in the infrastructure sector amounting to US$ 350 billion: Increased efficiency and productivity of the transport system would result in lower transit times. o Streamlining of the indirect tax structure: The introduction of Value Added Tax (VAT) and the proposed introduction of a singular Goods and Services Tax (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.

o Robust trade growth Strong economic growth and liberalization have led to considerable increase in domestic and international trade volumes over the past five years. Consequently, the requirement for transportation, handling and warehousing is growing at a robust pace and is driving the demand for integrated logistics solutions. o Globalization of manufacturing systems Globalization of manufacturing systems coupled with advancements in technology are increasingly compelling companies across verticals to concentrate on their core competencies and avail the cost saving potential of outsourcing. This is expected to contribute to an increase in the need for integrated logistic solutions, which is the niche of every Third Party Logistics Service (3PL Services) provider. The industry has been valued at US$ 125 billion in 2010. (CII)

Logistic services shipper

authority

Cooperative freight business

ecosystem

Dynamic multi-actor plan

Interoperable cargo, vehicle & infrastructure

Field user vehicle

Infrastructure eerre

Real-time automated event mgt

origin

destination

Shipment from factory

Long haul transport

Road transport

In city delivery

CURRENT SCENARIO OF LOGISTICS INDUSTRY Logistics is a quite an old concept, it has been becoming very efficient only after the wave of 1990s globalization. With the advent of intense competition coupled with globalization and liberalization forced both public and private firms committing themselves to make available to the customers, the right condition material, at the right place, at the right time, at the very lowest costmay be a product or a service. The World Bank in a recent survey connecting to compete: Trade logistics in global economy which conducts the LPI survey for every two years. The LPI is a multidimensional assessment of logistics performance, rated on a scale from one (worst) to five (best). The index uses more than 5,000 individual country assessments made by nearly 1,000 international freight forwarders to compare the trade logistics profiles of 155 countries. Based on a worldwide survey of freight forwarders and express carriers, the Logistics. Performance Index (LPI) is a benchmarking tool developed by the World Bank that measures performance along the logistics supply chain within a country. Allowing for comparisons across 155 countries, the index can helps in identify challenges and opportunities and improve their logisticsperformances. Technological progress and worldwide trade and investment liberalization are presenting new opportunities for countries to harness global markets for growth and poverty reduction. But with the advent of global supply chains, a new premium is being placed on being able to move goods rapidly, reliably, and cheaply. The ability to connect to the worldwide logistics web depends on a country's infrastructure, service markets, and trade processes. The government and the private sectors in many developing countries should improve these areas - or face the large and growing costs of exclusion, said a World Bank report.

Indian Logistics Industry

The Indian Logistics Industry is estimated at US$ 125 billion in 2010 Generated employment for 45 million people The industry is expected to grow annually at the rate of 15- 20 per cent, reaching revenues of approximately $ 385bn by 2015. Highly Unorganized with organized sector responsible only for 6% Market share of organised logistics players is also expected to double to approximately 12 per cent by 2015 The size of the 3PL industry is estimated to be~US$1.5 bn in FY11 (1% of logistics cost). The share of 3PL services is expected to increase from 6% in FY06 to 13% in FY11, at a CAGR of 25% Logistics costs are 10-20% of GDP Indian Infrastructure is rated 54th among the 59 countries -- Road : 56/59, Rail: 25/59, Seaport: 51/59, Airport: 40/59 Several factors helped the growth of logistics industry in India over the decade that includes changing tax system, rapid growth in industries such as automobile, pharmaceuticals, FMCG and retail. However, major sectors that are investing huge amounts in logistics industry are aviation, metal & mining and consumer durables. With increasing competition and cost, focus on outsourcing, entry of foreign players is having positive impact on the industry. Three major contributors for the growth of the logistic industry are: emergence of organized retail, increase in foreign trade and India becoming soon the manufacturing hub.

Indian Logistics Industry

Indian logistic industry

Airline Airport

Railway

Shipping

Others

Railway Airline Container freight station

Shipping

Storage & warehousi ng Cold chain

Ports

Airpot infrastruc -ture

Inland container depot

Domestic transports

3rd party logistic

courier

Cleaning & forwarding

Relocation nn Logistic park

As per the World Banks Logistics Performance Index 2012, India is placed at 46th position out of 155 countries. score 3.12 2.70 2.91 3.13 3.16 3.14 3.61 Rank 46 52 47 46 40 52 56

Overall LPI Customs Infrastructure International Shipments Logistics competence Tracking & tracing Timeliness

To improve infrastructure facilities and in turn the logistics industry government implemented several projects such as golden quadrilateral project, east-west and north-south corridors (connecting four major metros), Free Trade and Warehousing Zones (FTWZ) and private participation in the sector. The logistics cost in India which includes inventory holding, transportation, warehousing, packaging, losses and related administration costs is estimated at approximately 13 per cent of GDP and is high when compared to the corresponding figures for major economies. India's multi-layered tax regime, infrastructure bottlenecks and other inefficiencies have been the primary reasons in keeping logistics costs high in India.

Elements of Logistics cost

Transportation 35% Inventories 25% Losses 14% Packaging 11% Handling and Warehousing 9%

Share of logistics cost in total sale for various industries

Name of industry Cement Steel Food and Beverage FMCG Durables Apparel Auto % share of logistic cost in total sale 15% 6% 5% 4% 4% 3% 3%

Government Initiatives and regulations:

Initiatives:

To emphasis the significance of transportation in logistics industry and to increase the competence in the sector government introduced private participation, especially in port sector. The major initiative in transport infrastructure is introduction of National Maritime Development Program (NMDP) with an investment of Rs 568bn. NMDP would be addressing the challenges of the growing international traffic demand of the country along with developing the port facilities at par with world standards. While liberalizing the railway services, government opened the doors of container business to the private parties. A total of 15 players immediately entered the market.

Cargo traffic is always given second priority over passenger traffic in transportation industry. Due to which though railway transportation is cheaper in Inland transportation, it is not getting substantial share. To address this problem the Indian Railway has proposed the creation of a dedicated freight corridor connecting four metros covering 2800 route km, at a cost of about Rs 670bn to carry freight trains including containers. The dedicated freight corridor is proposed to come up by FY17E. To remove the differential state-level taxes that are causing higher unit and inventory carrying costs, government introduced uniform Goods and Services Tax (GST). As a result, there is expected to be significant reorganisation in warehousing system in the country.

FDI regulations

In general 100% FDI under the automatic route is permitted for all logistic services

FDI up to 100% subject to FIPB approval is permitted for courier services.

FDI up to 49% under the automatic route is permitted for air transport services, including air cargo services.

100% FDI is permitted in Ports and Harbours under automatic route

100% FDI is permitted under the automatic route for storage and warehousing including warehousing of agricultural products with cold storage.

100% FDI is permitted in transport and transport support services through automatic route

Logistics Market in India 2012

Growing investments in key sectors of the economy is driving the logistics market in India. Project logistics refers to handling of shipment of over dimensional cargo (ODC) more importantly those that have to be delivered within stipulated time. Such cargo need to be generally transported to remote locations that have accessibility constraints. 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.

India Emergence of a global manufacturing hub

The demand for FMCG and electronic products in India has been growing at a very fast pace. Several multinational companies from diverse industries have shown growing interest in setting up world-class manufacturing facilities in India to cater to the domestic market as well as for the export market. Establishing manufacturing facilities in India has been a strategic move to reduce their manufacturing costs and cater to the expanding Indian market.

The Indian automotive Industry is well on its way to being one of the world's major automobile manufacturing hubs. Since the deregulation and opening up of the automotive industry, the industry has witnessed tremendous changes and experienced a great boost. As an outcome of the growth in the automotive industry, the automotive components industry has also witnessed significant growth with the country becoming home to many world-class auto component suppliers.

Another industry which is seeing an upward swing is gems and Jewelry. India has been one of the leading exporters of gems and jewelry next only to countries like Belgium and Israel. Moreover Indian exports constitute about 55 per cent in terms of value of the world's polished diamond market. The IT Hardware industry is catching up with IT software and over the past couple of years India has slowly emerged as a manufacturing hub for IT hardware as well. Today India is well poised to emerge as a global manufacturing hub.

Indian Logistics: Future Trends:

There have been several key indicators to the future trend in the Indian logistics sector. The demand for logistics services has been largely driven by the remarkable growth of the Indian economy. Logistics spend in India is estimated to be around 13% of the GDP, which is comparatively higher than other developed countries.

The air transport sectors contribution has been around 0.2 per cent of the countrys GDP, while the transport sectors contribution to the GDP has been growing over the last couple of years. Indias air cargo is predicted to grow at over CAGR of 11.5 per cent in the next few years.

The contribution of the marine transport sector has also been around 0.2% to the countrys GDP. The sectors contribution to the GDP has been increasing mostly because of the growing economic developments in the country. The role of the shipping industry in the growth of Indian economy has been very significant. Major ports in India together have handled around 500 million tonnes of cargo in the past two years and this figure is growing significantly.

The Indian railways has realised the necessity to improve the infrastructure provide better service. The plan to develop Logistics Parks or hubs has the potential to streamline and optimize the supply chain and reduce the costs. Currently around 80% of the goods in India move by road, the railways has to essentially devise plans to divert this traffic to the rail.

Indias logistics sector attracted huge investments, leaving behind some of the major sectors including aviation, metals, and consumer durables. The growths in the retail and manufacturing industry, commodity markets and development of SEZs have been key factors in the growth of Indian logistics industry. Recent studies have indicated that the Indian logistics industry is expected to grow annually at the rate of 15 to 20%. A number of infrastructural projects involving warehouse and logistics parks are being undertaken are expected to be operational in the next 2-3 years.

The setting up special economic zones (SEZs) has led to increased logistics activities around them. Several logistics parks have come up at locations like Mumbai, Kolkata, Chennai and Hyderabad because of their excellent port, rail, and road connectivity and are witnessing significant investment in infrastructure. Many of the large logistics players are in the process of setting up warehouses, container freight stations (CFS), inland container depots(ICD), logistics parks, distribution centers and other facilities to leverage the abundant opportunities. Increase in foreign trade is expected to further accelerate the demand for logistics services.

The future of the Industry is very bright and is sure to witness exponential growth in the coming years. The increased participation of both public and private sector is crucial for developing logistics and improving supply chain management. Not only do the logistics companies need to create efficient business to thrive in the logistics sector, but they also need to explore ways for investing energy, costs and time to grow a strong logistics system.

Growing investments in key sector of the economy is driving the logistics Market in india

Market overview

logistics service provider face certain criticalities in while operating their business

LIST OF TOP LOGISTICS COMPANIES OF INDIA: TNT Express: This company is a key leader in the international market in the sector of global express services. The company ensures safe and on time delivery of your documents, freight and parcels. The company offers time and day definite delivery in about 200 nations across the world. It operates 47 jet freighter aircraft and 26,000 road vehicles and has a network of 2,300 companies. AFL : One among the acknowledged leaders among the logistics companies in India is AFL. Through its domain of logistics services, the company has delivered world class service in India. In 1979,the company introduced the first ever courier service by forming an alliance with DHL World Wide Express. The company offers services like Logistics and warehousing, Courier Company and Custom Consultant. DHL : This company is one among the major logistics companies in India. It is a market leader globally in overland transport, air freight and international express. The company ranks No.1 in the world in contract logistics and ocean freight. The biggest logistics and express network in the world has a network in about 220 territories and countries,72,000 vehicles,350 Aircrafts,36 hubs and 4,700 bases. Blue Dart : This logistics company is South Asia's top integrated express package Distribution and Courier Company. The domestic network of the company covers about 21,340 locations and provides service to 220 countries by the company's sales alliance with DHL. It provides the best service like Free Pick up from Your location, Regulatory Clearances, Real Time Tracking, Free Computerized Proof of Delivery etc. Gati : The company is a key leader in then arena of express cargo delivery and a significant one in the supply chain management solutions and distribution in India since the year 1989.The company provides services like the Ware Housing, Express Cargo etc. Logistics Solutions of the company are Warehousing, Supply chain Management. The Distribution Solutions of the company are Gati Surface Express, Gati coast to coast and Gati Air Express etc.

Safexpress : It is one of the largest express company in India. The company offers the best and integrated logistics solutions. In 2002 the Limca Book of Records declared the company as the Largest Logistics service Provider in India. The company has a network over 550 locations in 28 states and 7 countries. It has 3000 weather proof ISO-9002 vehicles. Ashok Leyland : The leading provider of logistic vehicles for the India Army is this company. It is a key leader in the tractor-tailers and multi axle trucks. The company manufactures buses, trucks, engines and special application vehicles in India. It is promoting a new company called Ashley Transport Services Ltd. for exchange of information and integrated services related to logistics in order to tackle the business of freight contractors. Agarwal Packers and Movers: This popular Indian logistics company provides logistic services like the home shifting, car packing etc. across India. The company believes in keeping technology and people and of course heart and soul in the movement of the individuals respective items. The company offers quality service in transportation and packing. DTDC : The biggest Domestic Delivery Network Company is DTDC. The company offers high class delivery service in about 3700 Indian locations and 240 international places. The company dispatches about 10 million parcels in a month. It also offers low cost for bigger parcels to US, UK, India, Nepal, Dubai and other places across the world.

First Flight: This logistics company in India specializes in courier services worldwide. The multi-tracking programs of the company are Domestic, International, First Wheels, First Wings and many others. The overseas offices of the company are in Malaysia, Singapore, UK, US, UAE, Quatar, Oman. The Indian logistics sector is growing at a rate of 20% comparing with the average logistics industry which is following growth of 10%. There is a great potential for the growth of the industry in India. The major opportunities are highlighted as below. 1. Many large Indian companies started providing in house logistics services eg: Reliance and TATA. 2. Indian shippers are now realizing that the customer service and the delivery performance are very much equally important. 3. The government of india focusing on Infrastructure developments which include SEZs, FTWZ( free trade and warehousing zones) , PPP( private public partnerships)

Market player

Industry trends:

Transportation: Container cargo represents only about 30% (by value) of India's external trade-much lower when compared with the global containerized cargo average of 70-75%. At a growth rate of 12%, India's container cargo traffic is estimated to reach 15 million TEUs by FY16E from about 7.5 million TEUs now (at 12 major ports). In comparison, China has created capacity at its ports to handle more than 100 million TEUs a year. Out of the 15 mn TEUs of total container traffic, we estimate Exim rail container traffic to be 5 mn TEUs by FY16E. This would be a huge opportunity and will significantly benefit container rail operators.

Rising investment in the rail and port spaces also fuels growth in allied industries like wagon manufacturing, port handling equipment, railway electrification systems and construction companies.

To reduce the transportation cost and for quicker movement of cargo Multimodal transport operation is introduced (MTO). MTO helps exporters with less documentation for instance single document for all modes of transport.

Rail Transport Market in India

Growth in international trade provides huge impetus to the growth in container rail market. Indian Railways earns the lions share from rail freight revenue owing to its dynamic tariff policy. With the privatization of the container rail service, rail freight gains popularity providing further scope for capturing higher market share. The Indian Railways is the worlds second largest rail network under a single board. The Railways in India provide the principal mode of transportation for freight and passengers. The growth of Indian Railways in the 155 years of its existence is phenomenal. It has played a crucial role in the economic, industrial and social development of the country. The Railways record for about 2.30% of the GDP and employs approx 1.5 million people directly. Indian Railways run over 63,273 km, of which 28.6% is electrified with a fleet of 8,330 locomotive units, 53,555 coaches and 2,04,034 wagons as on March, 2008. The freight segment accounts for about 70% of the revenue. The freight capacity has increased from 521 mn tons in 2003 to 779 mn tons in 2009.

INDIAN RAILWAY--- BASIC STATISTICS

Indian Railways (IR) is the worlds 4th largest rail network and the 2nd largest in Asia IR also happens to be the worlds fourth largest freight carrier Rail freight in India, particularly container rail operations which was primarily controlled by government has been opened to private operators since 2006 in order to bring competition in the rail freight market Entry of private and public sector operators is permitted by Ministry of Railways to get licenses for running container trains on the IR network

BasicBasic statistics of Indian Railway (as of feb 2012)

No.of railway station No. of railway bridges No. of locomotives No. of freight cars No. of route kilometers No. of trains each day No. of freight trains per day Freight traffic per day No. of employees Annual revenue base

7,083 1,31,205 9000 2,19,931 63,974 19000 7000 2.65MT 1.36MM INR 1,060 bn

Freight rates
From 1st Apr 2010, Inflation Concession of INR 100 per wagon is approved on booking of food grains for domestic use and Kerosene Oil From 27th Dec 2010, the taper of the Base Class100 was rationalized resulting in increase in freight rates ranging from 0.15% to 3.95% from 101 to 500 kms and 4% beyond 500 kms which did not increase in freight rates of food grains and chemical manures Revision of classification of sugar and deoiled cakes from Class110 to Class120

Rail transport (freight) market value chain

Industry trends:
Transportation: Container cargo represents only about 30% (by value) of India's external trade-much lower when compared with the global containerized cargo average of 70-75%. At a growth rate of 12%, India's container cargo traffic is estimated to reach 15 million TEUs by FY16E from about 7.5 million TEUs now (at 12 major ports). In comparison, China has created capacity at its ports to handle more than 100 million TEUs a year. Out of the 15 mn TEUs of total container traffic, we estimate Exim rail container traffic to be 5 mn TEUs by FY16E. This would be a huge opportunity and will significantly benefit container rail operators.

Rising investment in the rail and port spaces also fuels growth in allied industries like wagon manufacturing, port handling equipment, railway electrification systems and construction companies. To reduce the transportation cost and for quicker movement of cargo Multimodal transport operation is introduced (MTO). MTO helps exporters with less documentation for instance single document for all modes of transport.

Third Party Logistics (3PL):

Outsourcing is everywhere. Logistics industry is no exception. Logistics services like transportation, warehousing, cross docking, Inventory management, packaging and freight forwarding all are part of third party logistic services. Companies in India currently outsource an estimated of 52% of logistics. And 3PL industry is estimated to be US$ 1.5bn in FY11. 3PL represents only 1% of logistics cost emphasis its significance in the industry. Future is no doubt lying in outsourcing. As the growth in the 3PL market is expected to be in the range of 25-30% CAGR over FY11-13E. As of now, the 3PL activity is limited to only few industries like automotive, IT hardware, telecom and infrastructure equipment.

The organised 3PL market in India can be categorised into three major segments public sector, private sector and foreign entrants. Some of the major players in each category are: TVS logistics, DIESL (TATA), Panalpina, TCI, Gati , All cargo, V Trans, Total, VRL and Reliance etc.

Private Participation:
The industry is becoming more competent with the entry of global giants like Gazeley Broekmen (Wal-Mart's logistics partner), CH Robinson and Kerry logistics and large Indian corporate houses like Tata, Reliance and Bharti group. A series of mergers and acquisition like DHL acquired Blue Dart, TNT acquired Speedage Express Cargo Service and Fedex bought over Pafex, are also leading to consolidation industry at various levels and segments. Many of these companies are planning to broaden their areas of operation and are also planning to develop their own logistic parks across the country. If the trend continues as per the estimates, the market share of the organized logistics players is expected to double from 6% in 2007 to approx. 12% by 2015.

Express logistics:
Organised players have monopoly over the express logistics industry. 65% of express business is in the hands of organized players, while semiorganised and unorganised players accounts for 25% and the remaining 10% of the market by EMS Speed Post. But altogether different picture can be witnessed in the domestic segment. In domestic front, unorganised players hold 41% of the market share based on price advantage. While organised players accounts for 45% and EMS Speed Post the remaining 14%. Key players in express cargo are:

DHL, FedEx, TNT, UPS, AFL, DTDC, First Flight Couriers, TCI Express, Gati and VRL etc.

Warehouses:
Recently, warehouses have become key growth drivers in the logistics industry. Apart from conventional storing services, warehouses now providing value-added services like consolidation and breaking up of cargo, packaging, labelling, bar coding and reverse logistics etc. warehousing and related activities account for approx. 20% of the total logistics industry. Most of the warehousing space in India lies with unorganised players in domestic front, which is causing wide supply and demand gap in storage space. According to KPMG, an additional 120million square feet of warehousing space is needed by 2012 to bridge this gap. Currently, the organised warehousing industry in India has a capacity of approx. 80million metric tonnes and is growing at 35 to 40 per cent per annum. An investment of approximately US$ 500million is being planned by various logistics companies for the development of about 45million square feet of warehouse space by 2012. Many players in this segment such as Multi Modal Logistics Park, Mega Food Parks and Free Trade Warehousing Zones have planned next generation storage models.

Logistic parks:
About 110 logistics parks spread over approximately 3,500 acres at an estimated cost of $1 bn are expected to be operational and an estimated 45 mn ft2 of warehousing space with an investment of $ 500 mn is expected to be developed by various logistics companies by 2012. Majority of these logistics parks are planned in close proximity to state capitals. However, availability of large land parcels at relatively low cost, connectivity to multiple markets across states and industrial clusters has led to the emergence of some tier-2 and tier-3 cities as favoured destinations for the development of logistics parks and warehouses.