Domestic and international logistics:

Prospects and challenges

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Global logistics industry
Annual logistics cost of the world is about USD 3.5 trillion. The annual logistics
cost in India is valued at Rs. 6,750 billion (US$ 135 billion) and it is growing at 8-
10% annually (13% of the GDP of India)
Other countries' logistics cost share in GDP: US (9%), Europe (10%) and Japan
(11%), China (18%) and Thailand (16%)
In India road is the major mode of transportation of freight cargo (about 61% of
the cargo is moved by road and 30% by rail). Goods vehicle run only 250-300
kms/day in India (800-1000 km in developed countries)
Sources: Chandra and Sastry (2004); Mitra (2005); Foster and Armstrong (2006);
Mahalaksmi (2006); IIMA working papers; CII/KPMG/Deloitte reports etc.
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Continued..
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Road transportation
High level of fragmentation of the trucking industry (nearly 70% of the truck
owners own between 1-5 trucks)
Minimal use of multi-axle trucks
Poor road network coverage/quality
Much dependence on national highways (about 2% of the road network are national
highways)
Expressway network will take time to develop
Multiple check points (state borders/toll gates/for RTO inspections/octroi gates
etc.)
Note: A journey of 2150 kms between Kolkata and Mumbai a truck had to stop for as
much as 32 hours at various checkpoints on 26 different locations (Deloitte research
estimate, 2012)


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Rail transportation
Transit times are long and uncertain
Rail freight tariffs are high (nearly 4 times of US) as the
passenger tariff is a compensated by freight tariff
Lower flexibility in carrying different types of products
(perishable/semi-perishable/hazardous/ chemicals etc.)
Encouraging full train loads of freight (which discourages
small players)
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Sea transportation
High turnaround times (JNPs turnaround time is about 2 times the
turnaround of Singapore and Colombo)
Congestion on berths and slow evacuation process at the terminals
Inadequate depth at ports are unable to provide space to large ships
Costal shipping has not taken off (for inland distributions)
Lack of infrastructure becomes obstacle for freight movement

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Warehousing and distribution
State of cold storages/cold chain is poor
Warehousing (large number of small players with small capacities)
Poor deployment of handling, stacking and monitoring technologies
Value addition at warehouse and distribution centres etc. is very minimal
Lack of understanding the linkage between warehousing and transportation
Order processing and delivery status verification are two neglected areas
Improper packaging and lack of attention to the material under distribution
are some of the critical area s
Sources: Raghuram and Shah (2003); Sanyal (2006b)
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Knowledge and skill of manpower
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Continued..
Taxation knowledge
Fleet management and vehicle routing
Ability to take a scientific decision
Ability to understand technology
Good inter-personal skills
Lack of knowledge on best practices (e.g. for a warehouse FIFO/LIFO)
Lack of knowledge on routes/octroi/safety/national language/vehicle
maintenance etc. (especially for drivers)





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Some steps to make logistics better
Multimodal logistics (including space sharing) is yet to take off
Harmonization of taxes and documenting procedure
Implementation of nation-wide logistics IT-network (say for
documentation and payment)
Truck manufacturers could integrate tracking technology in its
products
Making the IT accessible to small and medium sized firms





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Multimodal transport (also known as combined transport) is the
transportation of goods under a single contract, but performed with at
least two different means of transport; the carrier is liable (in a legal
sense) for the entire carriage, even though it is performed by several
different modes of transport (by rail, sea and road, for example). The
carrier does not have to possess all the means of transport, and in practice
usually does not; the carriage is often performed by sub-carriers (referred
to in legal language as "actual carriers"). The carrier responsible for the
entire carriage is referred to as a multimodal transport operator, or MTO.
Article 1.1. of the United Nations Multimodal Convention (which has not
yet,
[when?]
and may never enter into force) defines multimodal transport as
follows: "'International multimodal transport' means the carriage of goods
by at least two different modes of transport on the basis of a multimodal
transport contract from a place in one country at which the goods are
taken in charge by the multimodal transport operator to a place
designated for delivery situated in a different country".
[1]

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Continued..
IT servicing firms could provide information service on highways tracking
movement of vehicles
Coordination across various government agencies (e.g., ports, roads,
railways, container freight operations etc.) to unblock various hurdles
Exploring and incorporating PPP in various logistics processes
The Motor Vehicles Act and the Motor Transport Workers Act require
modifications to address the quality of services (skill upgradation of
drivers/helpers)

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