Logistics And Its Problems In India

Submitted By: Group L

Difference between supply chain management and logistics

• Supply chain management (SCM) is the management of the flow of goods and services. It includes the movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption

• Logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet requirements of customers or corporations

Principles of supply chain management

• Segment customers based on service needs

• Customize the Supply Chain Management network

• Listen to signals of market demand and plan accordingly

• Differentiate product closer to the customer

• Strategically manage the sources of supply

• Develop a supply-chain-wide technology strategy

• Adopt channel-spanning performance measures

Trends in Logistics Sector

• The logistics market in India was esteemed at 5.6 trillion in 2010 and is gauge to develop at CAGR of more than eight for each penny throughout the following five years.

• World Bank has positioned India 47th among 150 nations, as far as logistics execution in 2010 and its potential later on.

• It is figure to become every year at a rate of 15 to 20% to reach 17 trillion by 2015.

• Then again, logistics costs in India constitute around 13 to 14% of its GDP against seven to eight for each penny being spent by created nations, for example, the US, Japan and other European nations

Reverse logistics

• Reverse logistics is the process of receiving returned merchandise with the purpose of proper disposal or recapturing value

• While many retail organizations run best-in-class transportation and logistics systems and processes, many of them have neglected reverse logistics as a primary focal area

Challenges to reverse logistics

Lack of awareness

about reverse logistics

Financial Constraint

s

Personal Resources

Problems with

product quality

Lack of appropriat

e performan

ce managem

ent system

Inadequate

information and

technological

systems

Legal Issues

Limited forecastin

g and planning.

Warehousing

• The Indian logistics market has evolved from traditional transport companies to a full-fledged logistics service provider, which offers various supply chain services such as transportation, warehousing and other value additions.

• The concept of third-party logistics (3PL), where companies provide outsourced or third-party logistics services to companies for part, or sometimes all of their supply chain management functions.

• Third-party logistics providers are typically specialized in integrated operation, warehousing and transportation services that can be scaled and customized based on market conditions and the demands

• Makers are working towards leaner supply chains with lesser lead times keeping in mind the end goal to pick up intensity in the business sector

• With assembling action expanding in the most recent couple of years, logistics has increased equivalent significance keeping in mind the end goal to give better merchandise at lesser expense

• Warehousing, which frames 20% of the aggregate logistics business sector

• The warehousing business sector in India is relied upon to develop at a rate of 35 to 40% every year, showing high potential for development throughout the following couple of years

Types of warehouses in India

Public warehous

es

Private warehous

es

Bonded warehous

es

Government

warehouses

Co-operative warehous

es

Cold storage

Problems associated with Warehousing

• Inadequate skilled labor

• Inefficient material handling with outdated handling equipment

• Limited technology penetration and innovation

• Lack of world-class standards and specifications

• Almost 92% of the market is dominated by unorganized players, while 70 to 75% of the organized market is being controlled by PSUs such as Central Warehousing Corporation (CWC), the Food Corporation of India (FCI) and State Warehousing Corporations (SWCs)

Strategic challenges in warehousing

• Infrastructure: An efficient warehousing operation hinges critically on high-quality supporting infrastructure that includes a good national highway network, interstate roads and congestion-free city roads

• Land availability: The lack of existing clear land classifications in Indian cities and the reclassification of land are major concerns as far as the development of warehouse zones are concerned

• Lack of standardization: The lack of warehousing standards and accreditation poses a significant challenge to the industry where quality and flexibility of available warehousing space is a major concern

• High cost of credit: Access to adequate and timely credit at a reasonable cost is one of the most critical problems faced by this sector

• Fragmented market with unorganized players: Economies of scale cannot be explored as the warehousing sector in India is dominated by small players with small capacities spread across India

• Power outages: Power outages are a major problem currently plaguing cold chains leading to a huge wastages of agri-products every year in India. The increasing cost of power adds further to the warehousing cost for agri-products

• High costs due to long transit time: Longer transit time and inadequate infrastructure also increase transportation costs

• Complex tax regime: The delay in the implementation of GST and the existing complex sales and transport tax system tends to discourage the establishment of a national-level centralized distribution centre or hubs, the likes of which are often seen in developed countries

Operational challenges

• Lack of integration with complete supply chain

• Lack of trained manpower

• Lack of IT penetration

• Lack of expertise in warehousing technologies

• Process inefficiencies

Route Optimization Challenges

• Roads constitute the most important mode of transport in the country, carrying 60% of the country’s total freight traffic and 85% of its total passenger traffic.

• While road freight volumes and the number of road vehicles are growing at a CAGR of 9.1% and 10.8%, respectively, the growth rate of the length of roads lags behind at 4%.

• This indicates that growth of road infrastructure is not keeping up with the growth in demand.

• The last few years have been difficult for development of highways in the country and physical achievement has fallen short of its intended target.

Last Mile Delivery

• The last mile problem in logistics refers to the last leg in the delivery of a product from supplier to customer

• Last mile has also been used to describe the difficulty in getting people from a transportation hub, especially railway stations, bus depots, and ferry slips, to their final destination

• When users have difficulty getting from their starting location to a transportation network, the scenario may alternatively be known as the first mile problem

• For perishable goods the last mile delivery problem is more complex for as compared to other product’s last mile delivery problem, the reason of which is the fact that the perishable goods have a time constraint as well as well as most of the time they are very fragile and can get spoiled even due to slight change in the temperature

Problems related to Last Mile Delivery

• Lack of Real Time tracking: Lack of real time tracking of the supplied goods are one of the biggest problems. The internet penetration is not very much in the far distant corners of India and also a lot of suppliers and consumers do not use internet and smartphones , tracking of their goods cannot be done so efficiently

• Temperature variation: Temperature variation is also a very hazardous effect for the perishable goods

• Route Deviation: Route deviation is also one of the major problem in last mile delivery, because of the high traffic jam or weather or road condition in India sometimes suppliers have to take a different route which can result in extra time and cost

Other Problems

• Cold chain infrastructure: The absence of cold chain infrastructure leads to wastage levels of around 40% of agricultural produce and perishables. It is estimated that the current cold storage infrastructure can only cater to 11% of its total produce

• Check posts: Check posts are not directly a serious hindrance to the movement of goods, the associated regulations, lack of automation (with the exception of a few states), inadequate staffing, unexplained and in-ordinate delays in clearance of consignments

• Compliance management cost: Eligible input VAT is creditable with VAT payable, the credit of CST and ET paid is not available as an eligible input tax credit, posing as an additional cost in the supply chain

• Lack of procedural clarity: Another impediment in the free flow of goods in India is the lack of clarity in procedures with regard to VAT/CST/ET regulations

Thank You