Gati MBA Project

7/27/2019 Gati MBA Project

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Distribution channels of Gati in retail segment: Scope and means for

promotion and branding

By

Haresh L

PGDM 2009-11

BIMTECH

Under the Guidance of

Industrial Guide Faculty GuideMr. Arindam Sen Gupta Mr. A K Dey

Manager, Retail Sales Professor, Operations & SCM

Gati Ltd, Kolkata BIMTECH

Greater Noida


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27 May 2010

Acknowledgement

Before leaving for Kolkata from my college in Greater Noida, I was very apprehensive as

to how I am going to spend my two months in a city to which Ive never been to, where

people speak the language I dont understand. But here I am after my first stint in the

corporate world to do a two-month summer internship to thank all those wonderful

people who helped me to learn a lot in this brief period. In these two months I got the

essence of why this internship is called summer internship.

I take this opportunity to thank Mr. Arindam Sen Gupta, EDC Head Sales, Gati Ltd,

Kolkata who helped me understand the intricacies of logistics industry and guided me

through the project. Thanks to my faculty guide Prof. A K Dey who has always been

there to engage in a discussion and clarify my doubts.

I sincerely thank all those people at Gati Ltd, Kolkata from both Service and Marketing

departments who helped me understand the operations involved in providing complex

logistics service, particularly Miss Niharika Mohapatra, Mr. Raja Biswas, Mr. Jagannath

Nag and Mr. Dinesh Sharma.

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Contents

S. No Chapter Page

1. Acknowledgement 2

2. Executive Summary 4

3. Introduction 6

4. Logistics 8

5. Supply Chain Management 9

6. Global Logistics Industry 11

7. 3PL 13

8. Indian Logistics Industry 16

9. Challenges faced by Indian Logistics Companies 18

10. Opportunities for Logistics Industry 19

11. Key Drivers of Growth 21

12. Key Players 21

13. Gati Ltd 22

14. Company Capabilities 26

15. Products/ services of Gati 26

16. Evolution of Business mix 28

17. Competitors 30

18. Distribution Channels of Gati 31

19. Elements of Distribution Network 34

20. Channel Design 35

21. Analysis and results of survey of Kiosks of Gati and competitors 36

22. Conclusion and Recommendations 40

23. Limitations 41

24. References 42

25. Appendix A: Questionnaire 43

26. Appendix B: Channel margins 45

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Executive Summary

Indian logistics industry is going through a transformation. With an expanding economy,

rising GDP and rising income levels of consumers there is an explosion of demand for

logistics services. The proposed Goods and Services Tax (GST) to be introduced from

next year, higher levels of FDI inflows and a greater expansion of domestic companies in

the coming years will lead to an unprecedented growth in demand for logistics services

from these companies to streamline their operations and supply chains.

With the entry of big foreign players like FedEx, UPS, DHL and TNT there will be a

consolidation in the market in the market in the form of Mergers and Acquisitions and

joint ventures. With the rise in demand for specialized and reliable logistics there will be

an increase in the market share of organized players who have scale and systems in place

to offer these services efficiently. Setting up of Free Trade and Warehousing Zones

(FTWZs), expansion of transportation infrastructure viz. road, rail, seaports and airports

will lead to greater efficiencies in logistics in the country.

Gati Ltd is a pioneer in Express Distribution and Supply Chain Solutions in India. It is inservice industry providing specialized and complex logistics services to customers from

different industry verticals. The objective of this report is to study the different

distribution channels of Gati in retail segment and identify the scope for promotion,

branding and expansion of the current distribution network.

The methodology followed to meet this objective is to study and understand the Indian

logistics industry by studying the industry trends and other aspects from several industry

related publications, business and operations of Gati by studying the company annual

reports and newsletters, internal operations and discussions with its employees and

associates. This is followed by a study of its distribution channels and that of its

competitors to identify areas of improvement.

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A survey Gati kiosks and that of competitors has been conducted to study the services

offered at these outlets, functions performed by them, their engagement with the

company and identify the current modes of promotion at their locality.

The results of the survey show that where as Gati is the preferred player for cargo

services with little competition from other organized players but in courier services it lags

due to severe competition, less number of outlets, and lack of promotion to make it a well

known name and preferred player for this service.

The company should increase its visibility by establishing more outlets at prime locations

and promoting aggressively through sales force, sign boards and advertisements.

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Introduction

The Problem:

According to Stern and El Ansary (1992), distribution channels are sets of interdependent

organizations involved in the process of making a product or service available for

consumption.

Gati Ltd is an Express Distribution and Supply Chain Solutions company providing

logistics solutions to its customers. Gati has a multi modal distribution network to reach

its customers. The different distribution channels are namely 1. Sales Force, 2. Gati

Associates, 3. Kiosks, 4. Website and 5. Customer Care centre.

The company broadly has two types of customers depending on the nature of their

transactions with the company. They are Retail customers and Credit customers. Retail

customers are those who do single or irregular transactions with the company. These

customers deal in cash basis. There are other type of customers who are contractual

customers and provide regular business to the company. These customers are extended a

period of credit and provided the service according to the agreement.

The objectives of this report is

To study the current distribution channels of Gati Ltd in retail segment

To identify the competitors of the company in retail segment and its outlets

To study the distribution channels of competitors

To identify the modes of promotion for the company and its outlets

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The Approach:

The methodology followed to meet these objectives is to study and understand the Indian

logistics industry by studying the industry trends and other aspects from several industry

related publications, business and operations of Gati by studying the company annual

reports and newsletters, internal operations and discussions with its employees and

associates. This is followed by a study of its distribution channels and that of its

competitors to identify areas of improvement.

A survey Gati kiosks and that of competitors has been conducted to study the services

offered at these outlets, functions performed by them, their engagement with the

company and identify the current modes of promotion at their locality.

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Transportation

Ever since the invention of wheel by mankind, there has been a revolution in the way

people travel, work and live. We have come a long way since then and there were many

technological developments, which made transportation convenient, comfortable and

affordable.

Transportation has converged the globe; it has brought people together, accelerated and

globalised trade and commerce. Transport ortransportation is the movement of people

and goods from one location to another. It might seem to be a very simple task just

move a mass from one place to another. But unfortunately it is not so. Just as I am writing

this 130 flights of the Indian national carrier Air India were cancelled due to an employeeunion strike with customers straddled at several airports across the country for hours.

Several airlines across the world went bankrupt. Transportation is a very complex process

which involves effective management to carry out the entire process smoothly.

Transportation is the back bone of any economy. Though developments in the field of

Information Technology have significantly reduced the need for physical movement,

transportation still plays a major role in the movement of goods and people. Modes of

transport include air, rail, road, water, cable, pipeline, and space. The field can be divided

into infrastructure, vehicles, and operations.

Logistics

Logistics is the management of the flow of goods, information and other resources,

including energy and people, between the point of origin and the point of consumption in

order to meet the requirements of consumers. Logistics is a part of supply chain

management (SCM).

The word logistics was first claimed to have been associated with the military in 1905

as a branch of war that pertains to the movement and the supply for armies.

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Logistics involves the integration of information, transportation, inventory, warehousing,

material-handling, and packaging, and occasionally security. Logistics is a channel of the

supply chain which adds the value of time and place utility.

Range of Logistics Services

Supply Chain Management (SCM)

A supply chain is a set of organizations directly linked by one or more of the upstream

and downstream flows of products, services, finances, and information from a source to a

customer. Managing a supply chain is 'supply chain management'. In literature, logistics

and SCM are often used interchangeably, though there is a subtle difference between the

two. While SCM is more strategic in nature, logistics is more operations-oriented.

Supply Chain Management is the systemic, strategic coordination of the traditional

business functions and the tactics across these business functions within a particular

company and across businesses within the supply chain, for the purposes of improving

the long-term performance of the individual companies and the supply chain as a whole.

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The evolution of logistics and SCM in the 1990s can be traced back to physical

distribution management in the 1970s when there was no coordination among the

various functions of an organization, and each was committed to attain its own goal. This

myopic approach then transformed into integrated logistic management in the 1980s

that called for the integration of various functions to achieve a system-wide objective.

SCM further widens this scope by including the suppliers and customers into the

organizational fold, and coordinating the flow of materials and information from the

procurement of raw materials to the consumption of finished goods.

The objectives of SCM are to eliminate redundancies, and reduce cycle time and

inventory so as to provide better customer service at lower cost. The focus has shifted

from the share of the market paradigm to the share of the customer paradigm,

wherein the goal is to create customer value leading to increased corporate

profitability, shareholder value, and sustained competitive advantage in the long run. The

successive stages of evolution of logistics and SCM, the central characteristics of each

stage, and the drivers of change are shown below.

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Global logistics industry:

Currently the annual logistics cost of the world is about USD 3.5 trillion. For any

country, the annual logistics cost varies between 9% and 20% of the GDP, the figure for

the US being about 9%.

The logistics industry is a very competitive one with a large number of international

players having presence in many countries. The service providers have a number of

issues to address, such as pricing pressures, high costs of operations and low returns on

investments, hiring and retaining talent, and pressure from clients to broaden the range of

service offerings and internationalize operations, demand for customized solutions and

more value-added services, besides infrastructure bottlenecks and government

regulations.

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The service providers have to continuously upgrade their networks and systems and equip

themselves with the latest technologies to carry out their complex operations and provide

the best logistics services to their customers. This involves huge capital expenditure and

an ongoing maintenance costs. Logistics companies the world over are increasingly

investing in technologies like Warehouse Management System (WMS), Enterprise

Resources Planning (ERP), Global Positioning System (GPS) and Radio Frequency

Identification (RFID) to provide the best logistics services increasing transparency and

efficiency of supply chains of their customers.

Globalization, consolidation, technology advancements and outsourcing have led to

growth in the logistics services market. The capabilities of logistics service providers are

growing along with the changing expectations of their clients. As the logistics services

industry evolves, competitors are moving away from asset-based commoditized services

to more strategic, information-based approaches.

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3PL

Third-party logistics (3PL) refers to outsourcing transportation, warehousing and other

logistics related activities to a 3PL service provider that were originally performed in-

house.

Third-party logistics (3PL) or logistics outsourcing is gaining importance as more and

more corporations across the world, unable to manage their complex supply chains, are

outsourcing logistics activities to the 3PL or logistics service providers. Globalisation has

led to rapid rise in the need for outsourcing logistics by companies looking for readymade

distribution channels to an entity with local expertise. Also the process of global sourcing

by companies and supply chains increasingly becoming global and complex has given

impetus to the growth of 3PL services.

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By outsourcing logistics activities, corporations are able to not only concentrate on their

core business operations, but also achieve cost-efficiency and improve delivery

performance and customer satisfaction.

Further evolving from outsourcing logistics to 3PL service providers companies are

moving towards 4PL and 5PL service providers to improve their logistics with minimum

investments and in a cost effective manner. This process of evolution helps companies to

build efficient supply chains, reach all the potential customers and achieve customer

satisfaction leading to improved business performance impacting both revenue and profit

growth.

System dynamics of a 3PL provider

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Indian Logistics Industry

Background

The logistics sector in India has evolved over the past two decades from being a pure

transportation / warehousing functional service to provision of more value added

offerings like customs clearance, domestic / international freight forwarding, cross-

docking, reverse logistics, freight consolidation, warehousing of modern standards etc.

India with a GDP of about Rs 31,297 billion is estimated to spend 13 per cent of its GDP

on logistics creating an industry size of around Rs. 4,068 billion (approx. Rs 4 lakh

crores). The industry generates employment to 4.5 crore people in the country. The sector

has been witnessing double-digit y-o-y growth rate since 2002 and is expected to be more

than USD 120 billion (approx Rs.5.4 lakh crores) by 2015.

India ranked 47th in the World Banks 2010 Logistics Performance Index (LPI) out of 115

countries that were assessed for their efficient logistics systems with a score of 3.12 out

of a possible 5.

While there has been a growing recognition in India of logistics as a strategic tool for

enterprise cost reduction and improvement of organizational efficiency on the flip side

however, the logistics sector is characterized by dominance of a disorganized market.

Transporters with fleets smaller than five trucks account for over two-thirds of the total

trucks owned and operated in India and make up 80% of revenues. The freight-

forwarding segment is also represented by thousands of small customs brokers and

clearing & forwarding agents, who cater to local cargo requirements. In order to reduce

logistics costs and focus on core competencies, Indian companies across verticals are

now increasingly seeking and using the services of third-party logistics service providers.

Traditionally LSPs (Logistics Service Providers) concentrated mainly on transportation

and logistics as they form a major share in logistics. However, in order to keep up with

rising demands and customer expectations, companies now also concentrate on value

added services like packaging, custom clearance, inventory management and labeling.

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The major elements of logistics costs for Indian Industries include transportation,

warehousing, inventory management and other value added services such as packaging.

The figure on the right shows that transportation and inventories account for 35 % and 25

% of logistics cost respectively, indicating their importance in logistics.

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Challenges faced by Indian logistics sector

These are among the supply chain challenges outside companies can expect as they enter

the India market:

Limited physical infrastructure. In India the national highways account for less

than 2 percent of the total road network, but carry 40 percent of the traffic. This is

one reason the average speed in India is 20 miles per hour, compared to the

Wests 60 miles per hour. The poor condition of roads translates directly to

shorter vehicle lifespan, which increases operating costs and reduces efficiency.

Off the highways, firms can only run trucks smaller than 20 feet. As of now, India

invests less than 4 percent of its GDP in infrastructure, compared to Chinas 9

percent.

Over-burdened ports. India has a long coastline, but its port system isnt well

utilized. Seventy percent of the seaborne trade is handled by 2 of its 12 major

ports, while 180 minor ports go virtually unutilized. As a result, turnaround time

far lags other global ports with vessels taking up to 3 days to debark. Many of

the secondary ports have infrastructure problems that arent a quick fix. Even

within its large ports, India cant support 6,000 TEU containerships, which make

up 25 percent of todays shipping volume. In addition to constraining Indias

growth in offshore production, this makes it difficult for manufacturers hoping to

import, rather than produce products for Indian consumers.

Non-existent warehouse standards. There is virtually no complex distribution

center set-up, no standards for suppliers, and little vendor compliance. Beyond

that, firms will find there is little vacant DC space available. Firms entering the

country will have to build this infrastructure, which will include supplying their

own electricity, running water, and road access.

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Disorganized trucking operations. Two-thirds of fleets have less than five

vehicles, making it difficult for shippers to manage the plethora of carriers

required to handle shipment volumes. Freight consolidators and brokers take a

commission to provide truck owners with consignments, and corruption is

rampant. Also, inadequate infrastructure causes equipment maintenance costs to

be abnormally high. These increasing costs and dwindling profits leave little

opportunity for small fleet owners to expand.

Multiple tax structures at entry points of different states. Multiple tax rates at

different states, octroi and different documentation requirements at the entry

checkpoints of different states consumes time and increases complexity of trade

between states. This acts a big blockade for movement of goods between states.

Opportunities:

The Indian economy at USD 1.2 trillion and growing at the rate of 7.5% offers

huge potential for the growth of logistics sector which is valued currently at USD

156 billion and expected to witness double digit growth in the coming years.

The phasing out of VAT and introduction of Goods and Services Tax (GST) will

remove multiple tax structures in different states and hence accelerate the

interstate movement of goods.

The investment in infrastructure projects like upgradation and setting up of

seaports and airports at several locations across the country, the Golden

Quadrilateral project and dedicated rail freight corridor will improve transport

infrastructure in the country, reduce logistics costs and lead times.

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The setting up Free Trade and Warehousing Zones (FTWZs) on the lines of SEZs

will increase investments in the sector and logistics infrastructure in the country.

The 3PL market in India is least developed and highly fragmented. However,

there is an immense potential for growth of 3PL in India, about 20% per annum

with companies increasingly outsourcing their logistics to focus on core activities

and achieve cost efficiencies.

The new mass-merchant-style organized retailing, which today makes up less than

4 percent of the overall market, is expected to grow to $60 billion and increase the

overall retail market by a compound annual growth rate (CAGR) of 21.8 percent

by 2015.

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Key Players

Indian logistics industry is a highly fragmented one with 99% of the market catered by

many small unorganized players and most of the remaining 1% catered by a large number

of organized players. So, one can see that the logistics industry in India is in a nascent

stage.

There are a large number of organized logistics service providers (LSPs) operating in

India operating in several modes viz road, rail, air and sea. Over the year each player has

developed competence in one or multiple modes, but none have achieved economies of

scale to operate cost effectively due to severe competition from unorganized players.

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Sales of some key players in Indian logistics industry (in crores)

0

200

400

600

800

10001200

1400

Aegis Gati Blue

Dart

Sical TCI XPS Safex

2006-07

2007-08

2008-09

Sales growth over the previous year (in %)

-20

-10

0

10

20

30

40

50

60

70

Aegis Gati Blue Dart Sical TCI XPS Safex

2008

2009

As can be seen above all the logistics companies have seen a decline in their sales growth

rates due to global recession followed by a slowdown in the domestic economy. Similarly

the net profits of these companies were impacted.

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PAT of some key players in Indian logistics industry (in crores)

-20

0

20

40

60

80

100

Aegis Gati Blue Dart Sical TCI

2006-07

2007-08

2008-09

Change in PAT over previous year (in %)

-200

-150

-100

-50

0

50

100

Aegis Gati Blue Dart Sical TCI 2008

2009

Though the industry was impacted by a slowdown in the last fiscal, it is going to rebound

in the coming year bolstered by a rebound in manufacturing and other economic

activities.

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Gati Ltd

Company Background

Gati is a pioneer in Express Distribution and supply chain solutions in India. Gati started

operations in 1989 as a door-to-door cargo company. A division of Transport Corporation

of India (TCI), it was the result of Mr. Mahendra K Agarwals conscious decision after

he returned from the United States with a degree in management. When he joined TCI in

1980, it was one of the top three transport companies in India. His aim was to rebuild an

otherwise successful TCI based on systems and processes and manage it professionally to

meet implicit and explicit consumer needs.

Based on customers feedback and interaction, Agarwal felt that, apart from moving

cargo, TCI could do something different which customers would value and appreciate.

Thus Gati was introduced in the market as a door-to-door cargo company with

commitment on delivery and money back guarantee. The name Gati was selected to

reflect and represent speed with direction.

Agarwal was aware that Gati was a late entrant to the generic cargo business. To make

progress, the business needed to be conducted with a different perspective. Gati was

willing to wait to generate surplus from the business. Agarwal chose time bound, point to

point delivery, premium priced cargo management service. With this offering, Gati

introduced the concept of express cargo in the Indian context.

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VISION and MISSON statement

Be a globally preferred provider of India-centric supply chain services and solutions, and

a leader in the Asia Pacific region.

Delight customers with quality service by setting new trends through innovation and

technology.

Be the most preferred organization for all stakeholders.

Be a responsible corporate citizen with the unwavering commitment to environmental

protection and conservation.

Business:

Gatis core business is Express Distribution and Supply Chain Solutions. It offers total

end-to-end logistics solutions to its customers.

Its two lines of business are

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Capabilities

Gati is Indias only multimodal logistics company, offering seamless connectivity

across air, road, ocean and rail. It is the Indias first logistics company to receive ISO 9001 certification

Gati covers 603 of Indias 611 districts, a reach unmatched by any other player.

It has a fleet of 4000 vehicles, 94 refrigerated trucks and 6 marine vessels to

ensure faster time to markets through well streamlined operations.

Leverages an extensive technology backbone that allows tracking of shipments

online

Provides real-time delivery information on shipments

Has over 2 million sq.ft. of best-in-class mechantronic warehousing space,

spanning the length and breadth of India

Delivers a record 3 million packages weighing over 46,000 tons every month

Has a dedicated workforce of 2,850 well trained Gatiites

Products/Services of Gati

Gati offers a host of products and services customised to meet the logistics requirements

of its customers. They are

Gati Surface Express

Gati Air Express

AI Gati Courier

Gati Art Express

Gati Supply ChainIntegrated Logistics

Gati Kausar Cold chain logistics

Gati Transport Solutions Full Truck Load

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Gati Europe Express

Gati Global Express

Gati Internationalthe global arm

Gati Coast to Coastthe shipping division

Gati Happiness Gift services

Gati Student Express

With its superior coverage, reach, facilities and capabilities Gati is all geared to provide

the best end-to-end logistics services to companies in different industry verticals. The

company has over the years has evolved from a desk-to-desk cargo company to a

preferred 3PL.

Performance of the company

The companys revenue has consistently grown at a CAGR of 12% from 2001-2009

increasing its share of logistics services in the country

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Evolution of business mix

Business by divisions:

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As can be seen from the below chart there has been shift in the companys business mix

over the years from low margin express segment to high margin logistics and freight

segment. The trend to outsource logistics to 3PL will further improve the earnings of the

company.

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Increase in assets and a rise in capabilities

The company has continuously invested in assets to increase its capabilities to deliver the

best logistics solutions. The company is transforming its network into a hub and spoke

model to increase the reach and operational efficiency.

Major competitors

The company over the years has built an extensive capability over the years to take on

competition, both from domestic and international competitors operating in the country.

But the competitors are catching up. Since the market for reliable logistics services is

increasing new players are entering the market and the established players areconsolidating.

Many large manufacturing and service units like Reliance, Mahindra & Mahindra, Future

Group have established their own in-house logistics divisions. Now these companies plan

to provide logistics services to other companies also.

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The major competitors of Gati in Express Division are

TNT

Safexpress

TCI XPS

AFL

Blue Dart

Distribution channels of Gati in Retail segment

In a country like India with so many diversities no single distribution channels is

perfect. Companies have to adopt a multi modal distribution network keeping in view

of the factors like market potential, nature of the product, customer expectations,

company strategy, industry trends, etc to reach a maximum number of potential

customers.

Gati has two types of customers one who has a long term relationship and regular

transactions with Gati. These customers are contractual customers who are extended a

period of credit as per the agreement. Then there are customers who do a single

transaction or irregular transactions with Gati, these customers deal with Gati on cash

basis and the segment is called Retail Segment. They can be either individuals or

businesses.

Gati is in service industry providing complex logistics solutions to customers. Gati

follows a multi modal distribution network to reach both business and individual

customers. Here time and material safety are critical factors affecting the customersatisfaction. So the company has to keep in mind these aspects while designing a

distribution channel.

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The different Booking channels in the distribution network of Gati are as follows.

1. 2.

3.

Booking/ Pickup

32

OU

OU

Kiosk / CafeGA

Customer Customer

OU

Sales Force GA

Customer


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4.

Online Booking/

Enquiry

5.

33

Customer

Company Website Sales Force

Customer

Customer Service

centreSales Force


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Elements of the distribution network

The several elements of Distribution network are as described below:

OU Operating Unit (OU) is the company office/hub which administers all the

operations in the regions under it. It may also act a transit hub.

Franchise - A franchise is a channel partner appointed by the company to carryout the

operations of an OU where the company doesnt have its own infrastructure or chooses to

do so depending on market conditions.

Kiosk A kiosk is a channel partner whose main job is to operate an outlet where

customers can book their shipments to be carried by the company.

Caf A caf is a company owned outlet where apart from booking services, other

services like Internet browsing, Printouts and Photocopying services are also offered.

GA Gati Associate (GA) is a channel partner who owns a vehicle and maintains it as

prescribed by the company whose primary job is to liaise with the areas sales force, take

shipment orders from customers, do booking, pickup the material from customers door

and deliver it at the regional OU.

Sales Force Sales Force consists of the personnel of the company whose key

responsibilities are Retention business development (RBD), New business development

(NBD), Channel partner development (CPD), Collections and Promotional activities in

the area under him.

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Channel Design

Earnings are shared with members of the distribution channels depending upon the

function performed by them in the channel, product, individual docket charges and rates

applicable after a ceiling on earnings of the member in a month.

Kiosk:

The main function of a kiosk is booking a shipment. A kiosk is paid depending on

whether it has its own connectivity with Gati, the kind of product offered and an upperand lower limit on margins per docket.

GA:

The main function of a GA is providing connectivity i.e. carrying a shipment. A GA is

paid depending on whether it is booking/delivery, the kind of product offered, and ceiling

on the earnings in a month and an upper limit and lower limit on margins per docket.

Franchise:

The main function of a Franchise is operating an OU. A franchise is paid depending on

whether it is booking/delivery, the kind of product offered, and ceiling on the earnings in

a month and an upper limit and lower limit on margins per docket.

For a detailed channel design of different members refer to Appendix B

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Analysis of survey of Gati kiosks and competitor outlets

A survey of all the24 kiosks of Gati in Kolkata over a period of 20 days to find out the

nature of transactions done at these outlets, average sales per month, promotional

activities carried out at these outlet locations and their experience with company and its

sales personnel.

Kiosk sales per month (in Rs)

39%

26%

17%

9%

9%


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From the above graph it is clear that kiosks are doing very low business in courierbookings.Competitors in courier services

24%

20%

23%

20%

13%

DTDC

Blue Dart

First Flight

Overnite

Others

From the above graph it can be concluded that courier industry is a very competitive one

with a large number of competitors vying aggressively with their distribution network

and price for the small pie.

Competitors in Cargo services

10%

37%

21%

7%

11%

14%

Blue Dart

Gati

Safexpress

TNT

XPS

Others

From the above graph it is clear that Gati has very little competition in cargo and express

distribution services and the company should focus on this segment.

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Experience with company and its workforce

0%0%

46%

37%

17%

Very bad

Bad

OK

GoodVery Good

What should be done by the company to increase sales at kiosks?

47%

21%

32%

Promotion

Improve services

Better support

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Distribution infrastructure of logistics companies in Kolkata

Courier companies

0

20

40

60

80

100

120

140

DTDC First Filight Overnite Gati Blue Dart

Cargo Companies

0

5

10

15

20

25

30

Blue Dart Gati Safexpress XPS AFL TNT

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From the above two graphs it is amply clear that Gati has adequate market penetration as

compared to other companies in cargo business. So the company should focus on its

cargo business and expand its share of the pie.

Conclusions and recommendations

The Indian logistics industry is going through a transformation. The sector will

see an unprecedented growth in the coming years with improved infrastructure

and a uniform tax structure. This will improve logistics performance and bring

down overall product cost making Indian products globally competitive.

Gati has good distribution network for cargo business as compared to its

competitors. But when it comes to courier business it does not have the adequate

reach to compete with the other courier companies who have huge distribution

infrastructure and compete on low prices.

From the survey of outlets, Gati (37%) is the preferred player in logistics services

for cargo business and Safexpress (21%) is its nearest competitor. But when itcomes to courier services it has many competitors like DTDC, Blue Dart and First

Flight.

Gati should expand its distribution network by setting up more outlets in prime

locations which will increase its revenues and also increases the brand visibility.

Gatis vehicles on road are a good mode of promotion, but it should step up its

promotion efforts by aggressively promoting its services through sign boards,

hoardings and media ads. It should support its outlets to promote the services of

Gati in their locality by providing adequate promotional material.

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Limitations

This study is an exploratory research to find out what kind of services are offered

by the company outlets, who are their competitors in their locality and what kind

of promotion is carried out by these outlets.

This considers only retail customers of the company who deal with company on

cash basis.

The study is carried out at outlets in and around Kolkata only. The results of the

study are applicable to that location only and the results may vary significantly for

other locations due to different distribution networks of the company and its

competitors and different market conditions.

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References

1. Mentzer, J.T. et al. (2001): Defining Supply Chain Management, in: Journal ofBusiness Logistics, Vol. 22, No. 2, 2001, pp. 125

2. Vrat, P., 1999. Supply Chain Management in India: Problems and Challenges. In:Sahay, B.S. (ed.), Supply Chain Management for Global Competitiveness, Macmillan,10-24

3. Seturam, S., 1999. Corporate Profitability and Supply Chain. In: Sahay, B.S. (ed.),Supply Chain Management for Global Competitiveness, Macmillan, 77-93.

4. Evans, R. and Danks, A., 1998. Strategic Supply Chain Management: Creatingshareholder value by aligning supplying chain strategy with business strategy. In:Gattorna, J. (ed.), Strategic Supply Chain Alignment, Gower, 18-37.

5. Mitra, Subrata., Logistics Industry: Global and Indian Perspectives, IIM CalcuttaResearch Papers

6. Mitra, Subrata., 2005, A Survey of the Third-Party Logistics (3PL) Service Providersin India, IIM Calcutta Research Papers

7. Deloitte Conference paper on SMEs in logistics: Bringing value to the changing Indianlandscape

8. Deloitte Report on Logistics and infrastructure: Exploring opportunities

9. May 28, 2008 Goldman Sachs Report on Indian logistics industry

10. Gati Ltd Annual Report 2008-09

11. BCG Report on Creating Distribution Advantage in India

12. Yerlan Ergalievich Manatayev, June 2004, Commoditization of the Third PartyLogistics Industry, MIT Center for Transportation and Logistics

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Appendix A

Questionnaire for Survey

1. Name

2. Address

3. Years with Gati Years in this industry

4. Nature of location

a) Commercial b) Academic c) Residential d) Institutional e) Industrial

f) Suburbs

5. Is the outlet company owned or outsourced?

a) Company Owned b) Outsourced

6. What are the products/services other than logistics being offered at the outlet?

7. What are the sales (from logistics) per month?

8. What is the Courier and Cargo business ratio?

9. What is the Cash and Credit business ratio?

10. What is the Domestic and International business ratio?

11. Is the booking done online or offline?

a) Online b) Offline

12. How many persons are employed in the outlet?

a) One b) Two c) Three or more

13. What are their qualifications? (Optional)

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14. What is the booking timing?

15. What are your major functions?

a) Booking b) Pickup c) Storage d) Dispatch e) Delivery f) Other

16. Is the pickup and delivery done by self or the company?

a) Self b) Company c) Third Party

17. Who are your competitors in Courier business?

a) Blue Dart b) DTDC c) First Flight d) Overnite Express e) Professional

f) Others (specify) g) None

18. Why do you think so?

19. Who are your competitors in Cargo business?

a) AFL b) Blue Dart c) Safexpress d) TNT e) XPS f) Others (specify)

g) None

20. Why do you think so?

21. What is the infrastructure and support being offered by the company?

22. How do you handle customer complaints?

23. Who do you communicate with?

a) Area sales person b) Service personnel c) Retail Manager

d) Service Manager e) Customer service executive f) Other

24. How do you communicate with the company?

a) Mobile b) e-mail c) Personal Visits d) Through Sales force

e) Through service personnel

25. What are the incentives being provided by the company?

26. What is your experience with the sales force and other employees of the

company?

a) Very bad b) Bad c) OK d) Good e) Very good

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27. What are the means (modes) of promotion in the area?

28. What should be done by the company to increase sales?

29. Any suggestions

Appendix B

Channel Margins

GA

Ceiling 50000Max/Dkt 580

Min/kt 15

BookingExpress Basis %

% AfterCeiling

Paid 9 6

TBB 7 6FOD 8 6

Priority Basis %

% AfterCeiling

Paid 8 6

TBB 6 6

FOD 7 6

Delivery

% % AfterCeiling

70Paise/Kg

60Paise/Kg

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Franchise connectivity


Min/kt 22.5


% AfterCeiling

Paid 13.5 8

TBB 12 8

FOD 10.5 8

Priori

ty Basis %

% After

CeilingPaid 12 8

TBB 10.5 8

FOD 12 8

Delivery

%% AfterCeiling

70Paise/Kg

60Paise/Kg

Franchise - Gati connectivity


Min/kt 22.5


% AfterCeiling

Paid 9 6

TBB 7 6

FOD 8 6

Priority Basis %

% AfterCeiling

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Paid 8 6

TBB 6 6

FOD 7 6

Delivery

%% AfterCeiling

70Paise/Kg

60Paise/Kg

Kiosk- connectivity

Ceiling No Ceiling

Max/Dkt 1000

Min/kt 10

Booking

Express Basis %

Paid 13.5

FOD 12

Priority Basis %

Paid 9

FOD 9

Zipp Basis %

Paid 22

FOD 22

Kiosk- Gati connectivity

Ceiling No Ceiling

Max/Dkt 1000

Min/kt 10

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Booking

Express Basis %

Paid 9

FOD 8

Priority Basis %

Paid 6

FOD 6

Zipp Basis %

Paid 17

FOD 17

Documents

Gati MBA Project