Logistics: Launching pad for India’s $385-bn EXIM vision

Over the centuries since ancient times, caravans of camels, oxen, mules and elephants carried goods in trading across countries, crossing mountains and valleys, while the sea routes witnessed ships of all sizes from sail-borne to motorised ones to gigantic tankers ferrying goods across the water in seas and oceans globally. Today, this movement is defined in massive Logistics and Transport, which is the management of flow of resources between the point of origin and the point of consumption in order to meet specific requirements, such as customers or corporates.

The growing Indian marketplace has a huge demand for technological inputs in the logistics sector which represents a runway to India’s $385 billion EXIM trade by the year 2015, according to Shantanu Bhadkamkar, immediate past chairman of the Federation of Freight Forwarders Association (FFFAI)  and convener of the 2nd edition of the three-day Intermodal India 2013 trade show, which was held in Mumbai recently to provide the Indian Transport and Logistics industry an ideal trade event that would attract high participation from various sectors through its one-on-one B2B meets, live solution zones, clinics and technical workshops.

‘We have taken the first step in our vision which brings together the stakeholders through this event that revolves around users — and not just the stakeholders — as the right forum for all in the EXIM trade as it addresses all related issues. One big take-away has been the active participation of Logistics service providers who eventually service the end-user community,’ said Bhadkamkar while pointing out that FFAI brought all stakeholders in the Maritime sector on a common platform by participating in the constitution of the Maritime Forum, and also the fact that most of the representations FFAI makes are in the interest of the larger EXIM community.

Mentioning Intermodal India as a big platform for the entire import export industry, FFFAI Chairman Debashis Dutta said that this event offers a unique and sophisticated platform for doing business in the cargo, transport and logistics sectors, besides further opening up avenues in air, sea and land transportation and providing an excellent participation opportunity for potential customers.

Indian buyers are looking for cost-effective logistic solutions as there is considerable scope to reduce costs in the Indian market and this event acted as one-stop shop for solutions, best practices and networking opportunities with leading national and International players in the market, besides bringing together stakeholders from the exim trade, government, transport service providers & users, and allied sectors including banking, IT, consultancy, etc, he said, adding that this provided a great fillip to the Indian logistics sector in its drive to become a vital cog in India’s growth economy. 

In the early days of refrigerated transport in India, frozen ice cream and frozen meat were the two major segments driving refrigerated transportation. Products such as processed foods, pharmaceuticals, flowers, cakes & pastries, dairy products, fruits and vegetables are now being transported in refrigerated trucks, which add to product quality and shelf life. However, the Indian cold chain is still at an early growth stage, notes Pankaj Mehta, Carrier Transicold India Director  in Indian Transport & Logistics News. It is a fragmented market, where the reefer transporter still finds it difficult to find reefer loads for return trips. While at present, there are very few cold chain service providers, the shift in consumption pattern, urbanisation and demand for better quality produce are the clear drivers for the growth of reefer transportation in India.

Shipping of India DG Gautam Chatterjee said that the Annual Logistics Performance Index report, which covers factors measuring efficiency of customs brokers, shows India currently ranked as 46th in the LPI, where Singapore is ranked No. 1. Emphasising the need for better utilisation of waterways for transportation in India, he said better last mile connectivity between inland waterways and other means of transportation like rail & road transportation needs to improve to save the cost of fuel and time.

KPMG India Director Sankalpa Bhattachariya described India as one of the highest growth potential logistics markets in the world today with the Government targeting 7 per cent GDP growth from 2013. The logistics industry segments are in 10 different stages of their evolution and mature segments need to start reinventing themselves to survive and remain profitable, he said, adding that it is high time the industry should think about their future strategy or it will cease to exist in the next five to seven years.

‘The future of Logistics lies in three words: PVR – Polarization, Vertical Specialists, and Reorganisation. The need for all these factors emerge, as logistics industry is a big industry with turnover of approximately $7 billion and is currently growing at the rate of 15 per cent CAGR. The industry needs to be mindful of the costs of non-compliance and should ensure that customs brokers are maintaining their accounts properly to avoid any non-compliance, which assumes significance in the current scenario where we are faced with: KYC norms, corruption, poor infrastructure, inefficient process, highly competitive and intense market conditions.’ Chartered Institute of Logistics and Transport-India (CILT) National Chairman in the Indian Transport & Logistics News K C Jena stated while quoting research, that some of the most serious risks in logistics services and business included flat growth for forwarders, pessimism about growth opportunities in air freight, ongoing overcapacity in ocean freight, and risk of cheap capacity.

The CILT, UK, defined logistics as ‘regional, national and global — it is everywhere and without the wheels of logistics, the industry would simply grind to a halt. Logistics is defined as the time-related positioning of resource. It is also described as the Five Rights. Essentially, it is the process of ensuring that goods or a service is: in the right place, at the right time, in the right quantity, at the right quality, at the right price.’ Companies in logistics industry face multiple risks, particularly in the light of continued global economic instability. Rising oil prices are a persistent threat. Industrial production slowed down during 2011. Economic challenges in the European Union, political instability and unrest across multiple areas of the globe, and a series of natural disasters have highlighted the often fragile nature of the freight forwarding and logistics business and the industry’s customer environment. However, on the positive side, rising demand is being experienced for advanced logistics capabilities and industry-specific solutions, especially in emerging markets. The increasing number of assembly plants in several markets – including Turkey, Mexico and Thailand – has positively pushed up the dynamics of the logistics industry. With the consistent growth of core sectors like automotive, consumer retail, pharma and healthcare and other major industries, the Indian 3PL market holds immense potential in the overall logistics industry. There have been some positive improvements in the logistics infrastructure in the recent past enabling the 3PL providers to offer integrated cargo transportation and warehousing services along with better control and services. The key trigger for the growth of 3PL market in India could be the introduction of the Goods and Service Tax (GST). With the current tax structure in Indian being very complex and requiring manufacturers to pay a variety of taxes, the introduction of GST is likely to reduce the tax burden. The factors that contribute to market growth include rapid globalization, 100 per cent FDI in retail and cool chain segment and private equity investment. With the advent of FDI in the Indian retail sector, the logistics market is projected to register positive organic growth in the long run.