Logistics Project

Global issues in logistics management PROJECT REPORT Submitted in partial fulfillment of Post-Graduate Degree

MASTER OF BUSINESS ADMINISTRATION 2010

NAME

: TAMILARASAN.A

ENROLMENT NO

: SAA04M147ELB1HA3

Under the supervision of

Dr. Nirmal Kumar. R. T M.Com.,M.B.A.,AMIBM.,Ph.D.,

SOUTH ASIA UNIVERSITY UNITED KINGDOM

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BONAFIDE CERTIFICATE

CERTIFICATE This is to certify that project entitled “GLOBAL ISSUES IN LOGISTICS

MANAGEMENT “

is submitted

by TAMILARASAN.A (ENROLMENT NUMBER -

SAA04M147ELB1HA3), GEMS B SCHOOL, PONDICHERRY in partial fulfillment of the first trimester requirement in Logistics Management for the award of the degree Master of Business Administration and is Certified to be an original and bonafide work.

Date :

Supervisor

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CONTENT

CHAPTER

TITLE

PAGE NO

ACKNOWLEDGEMENT EXECUTIVE SUMMARY

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INTRODUCTION

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FUNCTIONS OF LOGISTICS

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THREE CATEGORIES OF LOGISTICS

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VALUE-ADDED ROLE OF LOGISTICS

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IMPORTANCE OF LOGISTIC MANAGEMENT

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LOGISTIC PLANNING

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WHAT IS LIS & ITS OBJECTIVES

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LOGISTICS IN BUSINESS

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ADVANTAGE OF LOGISTICS

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CONCLUSION

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ACKNOWLEDGEMENT

I am indebted to all powerful almighty God for all the blessings he showered on me and for being with me throughout the study.

I also express with great pleasure and sincerity to record my thanks, gratitude and honour to Mr. L. Alphonse Liguori-Managing Director, Mr. M. Tamijuddin-Director academics.

I place on record my sincere gratitude and appreciation to my project guide Dr. NIRMALKUMAR.R.T for his kind co-operation and guidance which enable me to complete this project.

I

take

this opportunity to dedicate my project to our loving faculty

Dr. NIRMALKUMAR.R.T who was a constant source of motivation and I express my deep gratitude for his never ending support and encouragement during this project.

Finally I thank each and every one who helped me to complete this project.

DATE :

TAMILARASAN.A

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EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

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CHAPTER - 1 INTRODUCTION

INTRODUCTION

Logistics: “The service of providing the right resources at the right time and right place for efficient and effective performance of a goal-oriented activity, including consumption is called as logistics.” In simple words, “Logistics is the process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing 7

the goods- or service-producing network to fulfill customer requests; and utilizing the network to fulfill customer requests in timely way.” Logistics is the support element of the enterprise. It helps in managing the movement and storage of: ➢

Material into the enterprise.

➢

Goods in the enterprise.

➢

Finished goods from the enterprise.

Its focus should be upon its inbound logistics system (movement of material within the organization) and its outbound logistics system (meeting the requirements of its customers). The definition above accurately defines the logistics process but is too restrictive under the modern concept of logistics. Logistics, as a support element of the enterprise, incorporates activities beyond those identified in the preceding definition. Consider an example, the enterprise that introduces a new product or a significant change in the existing product. Support of the new product or feature may require training, the development of technical publications and the acquisition of spare parts and special tools or repair (test) equipment. These items also belong under the umbrella of logistics; thus our definition must be revised to include them. This is the simplified definition of logistics, which states logistics objective clearly: “Getting the right item to the right customer, in the right quantity, in the right condition, at the right place, at the right time and at the right cost.” The right item in the right quantity here prefers to the raw material, finished goods, trained personnel, spare parts or service created, required or procured by a firm based on ordered or forecasted customer (whether internal or external) requirements. This indicates the following role for logistics: (1) Accurate interpretation of customer requirements or orders or marketing strategy, as also providing manufacturing operations support. The right customer at the right time and the right place refers to the requirement of: (2) Precise execution of the process of reaching the product from the point of origin to the point of requirement/consumption.

The right condition concerns: (3) Suitable care of the product from the point of origin to the point of requirement consumption in order to avoid damage and/or deterioration. At the right cost indicates: (4)

Efficiency to ensure the lowest cost during execution. 8

Hence, logistics is the process of accurately interpreting customer requirements or orders or marketing strategy, as also providing manufacturing operations support, with precise execution of the process of reaching the product material from the point of origin to the point of requirement consumption ensuring suitable care of the product material throughout to avoid damage deterioration, continuously ensuring the lowest possible cost throughout the process. Logistics is concerned with getting products and services where they are needed when they are desired. The responsibility of logistics is the temporal and spatial positioning of raw materials, work in progress, and finished inventories when and where required. Hence, one of the basic functions of logistics is the

provision of availability.

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CHAPTER - 2 FUNCTIONS OF LOGISTICS

FUNCTIONS OF LOGISTICS Facility of location & Network design: Facility of location & network design refers to the design of the geographical structure of logistics facilities from where logistics operations are carried out. The number, size, location of logistics facilities like manufacturing plants, warehouse, cross dock operation, wholesaler & retail outlets affects to the aspects of other logistical function. This activity is necessary location & network structure.

Information management: It involves ensuring fast & accurate information for efficient & effective performance of logistical activities. Information also threads together all the activities in to an integrated process. Information gives a link of many activities such as order processing, Inventory management, forecasting, production scheduling. Many firms developed growing interest in logistics because of 1) Advancement in information technology 2) Growing recognition of system approach3) Higher emphases on customer service4) Total cost concept & etc 10

Transportation management: Transportation enables the means of transfer of inventory given the location & network framework developed earlier. This involves the selecting the modes of transportation like Air, Water, Rail, Road & the decisions relating to outsourcing this activities to other agencies. Selection of the modes of transportation depends on the following factors: A) Speed & reliability B) loss& damage C) Inventories D) Freight rate E) Market competitiveness F) Company policy & customer influence G) External market influences. The aspects of transportation management is an essential factor 1) Facility Location 2) Transportation cost3) consistency.

Inventory management: Inventory management concerns with the decision regarding the amount of type & material stored at various facility location. These decisions will be affected by the decision made under the function of facility location & transportation e.g.: the location of warehouse & retail outlets.& modes of transport whether fast or slow will affect the quantity type of material to be stored at facilities location.

Warehousing management: Warehousing provide the adequate space for the inventory at the right location, unpack aging, sorting, & consolidation of material & modification of material elements if required .the role of warehouse provide the economic & service benefit to the logistical system. Economic benefits: - movement consolidation, break bulk, cross-dock, processing /postpone movement & stock piling. Service benefits are spot stocking, assortments, mixing & production supports.

Material Handling system: Material handling activities are required while unloading, moving & loading material at facilities. These include the variety of mechanical equipment like Conveyors, Forklift, Truck, and Crane. One of the considerations of effective material handling is the minimization of product damage during handling.

Packaging: It helps in achieving the objective of maintaining the material in the right condition through the logistics process. Packaging decision is impacted by requirement of other activities like protection & facilitation during transportation, material handing & storage as so ultimately customer requirements

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CHAPTER – 3 CATEGORIES OF LOGISTICS

CATEGORIES OF LOGISTICS 12

Integrated logistics support, when properly understood and applied, can provide the means to identify and resolve many logistic problems, frequently before they developed. Logistics, in the broadest sense of the word, can be considered as scope of activity comprised of three major areas or subsets. (1) Subsistence logistics, (2) Operation logistics, and (3) System logistics. Subsistence logistics is concerned with the basic necessities of food, clothing, and shelter .At any given time, within any given environment, subsistence logistics is relatively stable and predictable. Men and women, as rational begings, know within very narrow limits what is needed, how much is needed, where it is needed, and when it is needed. Subsistence logistics is primary activity of primitive societies and is an essential ingredient of an industrial society. It provides foundation of operations logistics. Operation logistics extends beyond the bare necessities by incorporating systems that produce the luxuries or niceties of life. By definition, operations logistics incorporates the raw material required by the enterprise in the production. This category of logistics is also relatively constant and predictable. All enterprise, from the automobile manufacturer to the fast food chain store can determine the quality of materials and the resources needed for its production with high degree of accuracy. Operation logistic can not, however, determine when a component of the enterprise is going to break down ,what will be required to repair it ,or the duration activity .Operation logistics, which is concerned with the movement an storage of material in to ,through ,and out of enterprise ,provide the foundation for system logistics . System logistics incorporates the resources required in keeping a system in operating condition. These resources, or logistics elements, are spares and repair part, personnel and training, technical publication, test and support equipment, and facilities. A well designed integration of these logistics elements is critical when, for eg; repair instructions describe one methods of repair and tools are developed for another method . Thus repair may be impossible

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CHAPTER – 4 VALUE-ADDED ROLE OF LOGISTICS

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VALUE-ADDED ROLE OF LOGISTICS Four principal types of economic utility add value to a product or service. Included are form, time, place, and possession. Generally, we credit manufacturing activities with providing form utility, logistics activities with time and place utility, and marketing activities with possession utility. We discuss each briefly. ➢ Form Utility: Form utility refers to the value added to goods through a manufacturing, production, or assembly process. For example, form utility results when raw materials are combined in some predetermined manner to make a finished product. This is the case, for example, when a bottling firm adds together syrup, water, and carbonation to make a soft drink. This simple process of adding the raw materials together to produce the soft drink presents a change in production form that adds value to the product. ➢ Place Utility: Logistics provides place utility by moving goods from production surplus points to points where demand exists. Logistics extends the physical boundaries of the market area, thus adding economic value to the goods. This addition to the economic value of goods or services is known as place utility. Logistics creates place utility primarily through transportation. For example, moving farm produce by rail or truck from farm areas to markets where consumers need this produce creates place utility. The same is also true when steel is moved to a plant where the steel is used to make another product. The market boundary extension added by place utility increases competition, which usually leads to lower prices and increased product availability. ➢ Time Utility: Not only must goods and services be available where consumers need them, but they must also be at that point when customers demand them. This is called time utility, or the economic value added to a good or service by having it at a demand point at a specific time. Logistics creates time utility through proper inventory maintenance and the strategic location of goods and services. For example, logistics creates time utility by having heavily advertised products. To some extent, transportation may create time utility by moving something more quickly to a point of demand. Time utility is much more important today because of the emphasis upon reducing lead time and minimizing inventory levels through logistics-related strategies such as JIT inventory control. ➢ Possession Utility. Possession utility is primarily created through the basic marketing activities related to the promotion of products or services. We may define promotion as the effort, through direct and indirect contact with the customer, to increase the desire to possess a good or to benefit from a service. The role of logistics in the economy depends upon the existence of possession utility, for time or place utility make sense only if demand for the product or service exists. It is also true that marketing depends upon logistics.

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CHAPTER – 4 IMPORTANCE OF LOGISTICS MANAGEMENT

IMPORTANCE OF LOGISTICS MANAGEMENT

Logistics management from this total system is the means whereby the needs of customers are satisfied through the coordination of the materials and information flows that extend from the marketplace through the firm and its operations and beyond that to supplies. Today’s organizations worldwide need logistics management more than ever because of following: 16

1) Competitive pressure 2) information technology 3) channel power and 4) profit leverage. These are the discussed briefly in the following paragraphs. 1) Competitive pressure: during the 1970s. Logistics received more attention as a major cost driver to offset the effects of rising interest rates and increasing energy costs. In addition the logistics cost became more critical for many multinational companies because of globalization of their business. these developments affected logistics primarily in two ways :

I. The growth of world class competitors which has pressurized organization to differentiate themselves and their product offerings. Logistics enable domestic firms to provide more reliable and responsive services to customers in the local markets than overseas competitors. II. As firms increasingly buy and sell off-shore, the supply chain between the manufacturing firm and its supplier and customer firms become longer, costlier and more complex. Hence in such situation, excellent logistics is necessary to take advantage of global opportunities.

1) IINFORMATION TECHNOLOGY: with the explosion of information technology, organization

gained the ability to better monitor transaction intensive activities such as ordering, transportation and storage of goods and materials. Computerized quantitative models along with technology increased the ability to manage material flows and optimize inventory levels and movements. For example, systems such as material requirement planning (MRP 1), distribution resources planning (DRP) and just-in-time (JIT) allowed firms to link many activities such as order processing, inventory management, forecasting and production scheduling. 2) CHANNEL POWER: the channel power shifted from manufacturers to wholesalers,

distributors and retailers. This has had a great impact on logistics. In major consumer good industries, when competition increases, many suppliers and manufacturers are forced out of competition and a few leading; competitors remain in the market. Those who remain are highly competitive and are able to offer very high quality products. In the views of consumers, all of the leading brands are substitute for each other and lower brand loyalty decreases the manufacturer’s power. Ultimately sales of consumer products are determined by what is in stock, and not by what particular brand offered to the customers. 3) PROFIT LEVERAGE: Any amount of money saved in logistics costs has greater impact on the organizations profitability than a similar increase in sales revenue considerably because profit earned through sales is only a small percent of sales revenue. Hence, a rupee saved in logistics is a rupee increase in the company’s profit. Therefore, we can infer that logistics cost savings have much more leverage than an increase in sales.

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CHAPTER – 5 LOGISTIC PLANNING

LOGISTIC PLANNING A corporate mission is a statement setting out long range goals unique to each organization elucidating the business the company wants to be in, who its customers are its basic beliefs about business, and its goals of survival growth and profitability. Objectives and goals sets the targets which are to be achieved in the long term in order to fulfill the mission of the firms in order to achieve the long term objectives and goals, alternatives strategies or actions plans need to be evaluated in the context of the environment faced by the firm from these alternatives, specific

strategies must be selected for

implementation in order to meet the objectives and goals that will fulfill the mission of the firm hence business strategy is a long range game plan of an organization and provides a road map of how to achieve the 19

corporate mission. The strategic or long term plans for the firm and developed at the highest level of management of the firm. The strategic planning for each of the functions of the firm, such as marketing, operations, logistics, etc.that are derived from the firms strategic plans, are developed at the highest level of the concerned function. The strategic plan within the function need to be detailed in the form of tactical and operational plans at the tactical and operational levels of management in the respective function. The operational level og management of a function in affirm plans the operational activities in order to meet the tactical and strategic plans of the function and control the activities during implementation on order to meet the operational plans. According to the planning level illustrates the logical flow of the planning process across the organization. The activity flows in the logistic function bring out the sequence of activities from order receipt to procurement to customer delivery. Strategic plans determine the capacity plans by defining the internal capacity limitations in manufacturing, warehousing, and transportation as well as human resources. PLANNING AND OPERATIONS PROCESS The strategic plans developed for the firm lead to the development of strategic plans for the logistics functions. These in turn generates the tactical and operational logistical plans. For e.g. the objectives of cost reductions for a firm would less to strategies to reduce total logistics cost reduction for a firm would lead to strategies to reduce total strategies costs. these strategic plans could take the form of, for e.g. reducing the number of warehouses, transportation consolidation, or purchase of new software for logistic information management next ,the tactical plans are developed to implement the stetegic plans .tactical plans out line the steps or procedure that are required to execute strategic plans. for eg in order to reduce the number of warehouses one can plan to centralize the ware housing at a few locations by increasing the capacity of these warehouses which are not economical. At the operational level, operational plans are developed in order to perform and control the activities to accomplish the tactical plans thus operational plans need to be developed for performing the logistics activities from the fewer warehouses as decided in the tactical plans A corporate mission is a statement setting out long range goals unique to each organization elucidating the business the company wants to be in, which its customers are its basic beliefs about business, and its goals of survival growth and profitability. Objectives and goals sets the targets which are to be achieved in the long term in order to fulfill the mission of the firm in order to achieve the long term objectives and goals, alternatives strategies or actions plans need to be evaluated in the context of the environment faced by the 20

firm from these alternatives specific strategies must be selected for implementation in order to meet the objectives and goals that will fulfill the mission of the firm hence business strategy is a long range game plan of an organization and provides a road map of how to achieve the corporate mission. The strategic or long term plans for the firm and developed at the highest level of management of the firm.

WHAT IS LOGISTC INFORMATION SYSTEM AND ITS OBJECTIVES Logistic information system is nothing but to manage, control and measure the logistical activities. These activities occur within the organization or as well as overall across the supply chain. Logistics information systems are important for achieving logistics efficiency and effectiveness. In an enterprise, logistics information system seeks to achieve the following: 1) It ensures of logistics functional operations into a process pursuing customer satisfaction at the lowest total cost. 2) Information system facilitates planning and control of the logistical activities related to order fulfillment. 3) It makes the firm more competitive, by making better tactical and strategic decision for the benefits of the firm and its customer. 4) Helps provide customers information regarding product availability, order status, and delivery schedules promoting customers service. 5) It reduces the requirements of inventory and human resources by enabling requirements planning. 6) It interfaces with marketing, financial, and manufacturing information systems and provides information to top management to help formulate strategic decisions for the whole firm. . 7) The use information technology in information systems has enabled quick response to demand making forecasting redundant. This has also helped in implementing “pull” systems like just-in-time making the firm more competitive. 8) It promotes systems that link the operations of the firm, such as manufacturing and distributing, with the suppliers operations on the one hand the customer on the other. 9) In the other cases, organizations are finding that through information they can manage dispersed inventories as if they were single inventory. The benefits of this can be considerable. If inventory management is centralized and decisions on replenishment and other quantities are taken or the basis that is a single stock, then only one safety stock instead of many required. The stock itself can be carried anywhere in the system, either near the point of production or the consumption. This is the concept of ‘virtual’ inventory management or electronic inventory management.

LOGISTICS IN BUSINESS In the first half of the twentieth century, logistics existed as a fragmented and elusive activity with little recognition beyond the military services and those firms that were a part of the military-industrial complex. This began to change in the latter half of the twentieth century as business realized the potential benefits of logistics. Logistics management is concerned with the development and implementation of a methodology for ensuring the efficient and cost-effective attainment of logistic objectives. Logistics management is the most 21

widely accepted term and encompasses logistics not only in the private business sector but also in the public/government and nonprofit sectors. In addition, service companies including banks, hospitals, restaurants, hotels, and so on have logistics challenges and issues, and logistics management is an appropriate form for the service industry.

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CHAPTER-6 LOGISTICS FOR COMPETITIVE ADVANTAGE

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LOGISTICS FOR COMPETITIVE ADVANTAGE Martin Christopher has presented an interesting ‘Three C’s” model of competitive advantage: The bases for success in the marketplace are numerous, but a simple model is based around the triangular linkage of the company, its customers and its competitors – the ‘Three C’s’. The source of competitive advantage is found firstly in the ability of the organization to differentiate itself, in the eyes of customer, from its competition and secondly by operating at a lower cost and hence at lower profit. Seeking a sustainable and defensible competitive advantage has become the concern of every manager who is alert to the realities of the marketplace. It is no longer acceptable to assume that good products are sold themselves, neither it is advisable to imagine that success today will carry forward into tomorrow. Let us consider the bases of success in any competitive context. At its most elemental, commercial success derives either from a cost advantage or a value advantage or ideally both. It is as simple as that – most profitable competitor in any industry sector tends to be lowest cost producer or the supplier providing a product with the greatest perceived differentiated values. Put very simple, successful companies either have a productivity advantage or they have a ‘value’ advantage or they have a combination of both. The productivity advantage gives a lower cost profile and the value advantage gives the product or offering a differential ‘plus’ over competitive offerings.

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Diagrammatic Representation of Three C’s Model

Needs seeking Competit Company Customers Value Value benefits at acceptable Assets and prices ors Cost Differentials Utilization

Those firms that develop superior logistical competency are strategically positioned to enjoy hard-to-duplicate competitive advantage in terms of cost and service performance. It can be said that a firm achieves competitive advantage over its competitors by fulfilling customer requirements (value advantage or effectiveness) at the lowest cost (productivity advantage or efficiency).

PRODUCTIVITY ADVANTAGE In many industries there will be a competitor who will be a low cost producer and will have greater sales volume in that sector. This is partly due to economies of scale, which enable fixed costs to spread over a greater volume but more particularly to the impact of the experience curve.

It is possible to identify and predict improvements in the rate of output of workers as they become more skilled in the processes and tasks on which they work. Bruce Henderson extended this concept by demonstrating that all costs, not just production costs, would decline at a given rate as volume increased. This 25

cost decline applies only to value added, i.e. costs other than bought in supplies. Traditionally it has been suggested that the main route to cost reduction was by gaining greater sales volume and there can be no doubt about the close linkage between relative market share and relative costs. However it must also be recognized that logistics management can provide a multitude of ways to increase efficiency and productivity and hence contribute significantly to reduced unit costs.

♦

VALUE ADVANTAGE

It is a observed that customers don’t buy products they buy benefits. These benefits may be intangible i.e. they relate not to specific product features but to such things as image and reputation. Unless the product or service that we offer can be distinguished in some way from its competitors there is a strong likelihood that the marketplace will view it as a ‘commodity’ and so the sale will tend to go to the cheapest supplier. Value differentiation can be gained in numerous ways. When a company scrutinizes markets closely it frequently finds that there are distinct value segments. In other words different groups of customers attach different levels of importance to different benefits. Adding value through differentiation is a powerful means of achieving a defensible advantage in the market. Equally powerful as a means of adding value is service. Increasingly it is the case that markets are becoming more service sensitive and this poses a challenge in management of logistics. It is important to seek differentiation through means other than technology. A number of companies have responded to this by focusing upon service as a means of gaining a competitive edge. Service in this context relates to the process of developing relationships with customers through the provision of an augmented offer. This augmentation can take many forms including delivery service, after sales service, financial packages, technical support and so on. This matrix is a useful way of examining the options available for value and productivity advantage: SERVICE LEADER

COST & SERVICE LEADER

COMMODITY

COST LEADER

MARKET In commodity market situations where a company’s products are indistinguishable from their competitors’ offerings the only strategy is to move towards being a cost leader or towards being a service leader. Often the leadership route is not available. This particularly will be the case in a mature market where substantial market share gains are difficult to achieve. Cost leadership strategies have been based upon the economies of scale, gained through greater volume of sales. This is why market share is considered to be so important in many industries. This cost advantage can be used strategically to assume a position of price leader and make it difficult for high cost competitors to survive. This cost advantage can come through effective logistics management. In many industries logistics cost represents such a large part of total costs that that it is possible to make major cost reductions through fundamentally reengineering logistics processes. 26

The other way to come out of the commodity quadrant of the matrix is to seek a strategy of differentiation through service excellence. Customers in all industries are seeking greater responsiveness and reliability from suppliers; they are looking for reduced lead times, just-in-time delivery and value added services that help them do a better job of serving their customers.

Evolution of Norms for Manpower and Logistics Requirements at Police Station, Sub-division and District Levels Greek verb ‘logistikos’ meaning compute or calculate, and French verb ‘loger’ meaning lodge are the roots of the English noun ‘logistics’, meaning supply of supportive attributes like manpower, transport, communication reticulation, weapons systems and other facilitators in any operation as planned in advance, and accurately trace the true nature of an effective logistics in terms of computed and calculated planning, and lodging or infixing the supportive tools as calculated and planned in advance to be lodged at right time, place and occasion to meet the needs of the operation for efficient performance and results, ipso facto investing logistics and its execution a managerial edge. Logistics and logistics support imprimis are managerial tools built on the bedrock of the management techniques. Logistics au fond is perficient material management run with an edge of precise time management and efficient space management, made possible with right foresight, creative vision, incisive planning and accurate execution. Evolution of norms for logistics in police organisations is byword for the desire for the application of management principles to policing and police organisations. It represents induction of the faculty of ratiocination to the field of policing and police organisations. It is a visionary step and prognosticates the aurora of the scientific age in police organisations. Logistics norms differ only in details from the Police Station level to the sub-division level to district level while rest on the same bedrock of broad managerial techniques. Prime Vectors Both Police Station and District Police Administration are the pillars of the policing structure of India with sub-divisions providing the links between the two. Sub-divisions derive their sustenance and draw manpower and logistics from the Police Stations, ergo strong and efficient Police Stations mean strong sub-divisions. In exceptional cases, subdivisions can always depend upon the strength of the district police force. Sub-divisions as such do not have independent existence apart from the Police Stations under them and the district police administration that guides and controls them. Therefore, discussion on the logistics requirements of the Police Stations and the district police administration inter se covers sub-divisions too. Police Stations and district police administrations as the basic structures of the policing, need to be pollent units capable of independently tackling crimes, security and law and order issues from their own provenances, so that higher units are free to focus on larger issues of countrywide dimensions sans distractions. For this to happen, the Police Stations have to be full-fledged units as far as their manpower and logistics requirements are concerned without the need of asking and waiting for the help extra muros. A sense of autarchy and autarky is basic here. The change brings pride to the unit and boosts morale bringing in high motivation and inculcating lofty purpose to the job of policing. The end result will be quality and often competitive performance of very high order in policing which sadly is a mere dream in the extant policing structure of India.

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Police Station setup of present India grievously falls short in logistics and infrastructure support whether it is in manpower, transport, communication network, weapon systems or financial powers. Though district police administrations are in far better position than the Police Stations in all compartments en face respective requirements, they too are far from an ideal position in respect of their requirements. While Police Stations must look to the district police administration for help for manpower and logistics support for every uncommon situation, the district police administration in turn looks to the state headquarters for elbow space. Even begging other government departments for transport and other infrastructure facilities is not unheard of. This is not an ideal situation by any stretch of imagination to any police setup and should stop. Armed Police Units Both Police Stations and district police administrations should become self-contained units in respect of manpower, transport facilities, communication reticulatum, weaponry and other logistics requirements. Every Police Station should convert into a nidus of police functions under an officer of the rank of Police Inspector assisted by scores of Sub-Inspectors in charge of different policing functions like crime, traffic, headquarters, intelligence, law and order and armed police. Every Police Station must have a unit of its own armed reserve under a PSI that provides men also for extraneous duties like guards, courts, summons, orderly services apart from being the striking force. The armed police units of the district police administration need to be strengthened in most districts and properly trained. Intelligence Gathering Both Police Station and district police administration setups as far as intelligence gathering is concerned is in extremely poor shape uniformly in most states of India, save a few like Jammu and Kashmir where the need of self-preservation perforce dictated terms to strengthen the intelligence apparatus. Intelligence is the bedrock of effective policing and sine qua non for professional policing. Intelligence gathering and analyses apparatchik is the principium among the core logistics supports that makes difference to the quality of the policing process in both the Police Station and district police administration levels. Districts do have structures to handle both the crime and law and order intelligence, though poorly equipped and seldom made use of, while the same in the Police Station levels is almost nonexistent. Intelligence gathering apparatchik needs to be strengthened at both the levels to enrich policing process with relevant intelligence. An officer of the rank of PSI with adequate staff in a Police Station should be in exclusive charge of collecting both the crime and law and order intelligence to strengthen the hands of the officer heading the Police Station.

Mini Police Commissionerates

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Police Stations as centres of policing functions must work as mini police commissionerates sans magisterial powers and treated as such in importance and powers. Trust begets trust and trust sprouts responsibility. Once Police Stations revive respectability and importance on par with that of the British vintage, they may regain their whilom aureole at no time. This is so also with the district police administrations. Indeed, there are the issues of corruption and misuse of powers that are beyond the scope of this discussion and it suffices to state that appropriate checks and counterchecks should be in place to counter such eventualities.

Nidus of Police Functions Pollent Police Stations as the centers of police functions justifies fewer police stations around and irrationalise the present donnert trend among the top-brass of crying wolf for creating more and more police stations at every possible opportunity and howling hoarse for many more to create ‘gulli-gulli police station’ situation with most of them weak and incapable of independent existence and just meant as mere show-pieces for the public consumption and adding to the welter in jurisdictional and other complications. The epinosic response is owing to the copycat mindset so prolate among the Indian police leadership of the postindependent vintage. Quantity is an irrelevant concept in the extant age of hi-tech world, and transport and communication explosions render the world increasingly smaller every passing day. What is required is quality. The stress must be on resourcefulness and response time. Fewer Police Stations, each a nidus of the police functions at strategic locations and selfdependent in its manpower and other logistic requirements of transport, communication, weaponry and related facilitators is the need of the hour. Control room oriented policing with shortened response time are capable to tackle any kind of police emergencies and contingencies within a given area. District police administrations must function as the custodian and provider of special techniques, high-tech gadgets and higher counseling and guidance to the benefits of the Police Stations apart from its extant conventional duties. Control Rooms This brings the issue of control room oriented policing that suits best in urban areas to the fore. Shift systems round the clock and response time are the key factors in such a policing system. Logistics support becomes the crucial issue in the control room oriented policing system as the effectiveness of the system depends tout a fait on effective logistics designs, planning and management in place. Police Stations fully self-dependent in manpower and other logistics supports like transport, communication, weaponry and other facilitators alone can handle control rooms successfully for perficient policing. Such a system presupposes committed manpower working on round the clock shifts and requiring high morale. High morale in turn depends on job satisfaction and right job culture that are built on perfect man management practices. All these issues need to be tackled one after the other for efficient policing. Indian police of present days is a far cry from those objectives.

Manpower In a country bogged down with endemic unemployment, and steeped in cheap labour, manpower should not be a problem though eurhythmic quality production may often become an issue. No discussion on manpower 29

is complete without the factors of morale, motivation, competence, discipline and commitment are taken into account. No analysis on logistics is complete without the production factor of the manpower is assessed. Shift System Policing being a round the clock responsibility, a three-shift system is sine qua non in a grass-root policing unit like the Police Station. And unlike now, the system must be statutorily defined and duly moulded and rounded off for effective functioning with clearcut division of labour in place. Lack of this clarity and arbitrary day-to-day allotment of duties on one’s own fancies by lower ranks in the Police Stations is the radicis of all the maelstrom in manangement noticed in police stations these days resulting in low and inefficient turn-out of work. A well-defined shift system and purposeful man management policy directed towards high motivation and morale should work as the nostrum to the malady. Efficient Man Management Sound incentive schemes based on the innards of the human psyche and latest managerial techniques and committed leadership models can do the tricks to maximize the output with the minimum input and save the criminal wastages in manpower that are common features of the present man management in Indian police, where a few islands of manpower are over-worked while most wanze precious man-hours without productive output. Any step to break this epinosic trend will save Indian police from gargantuan manpower wastages. This aspect needs priority. An important feature of the efficient man management is best utilization of the available manpower talents. Indian police of the post-independent vintage is notoriously profligate in frittering away and even curbing precious human talents that land on its lap by its good fortune. An example is that of a brilliant police officer from an Indian state who made name as a poet, an intellectual and an original thinker on police and policing subjects with scores of published books on poetry and policing subjects to his credit and a popular writer on police subjects on all major English newspapers, and wellknown for his immaculate conduct and foursquare character, being persistently and consistently harassed gratuitously for decades, denied promotion for more than twenty-one years without offering a reason in the ambience of no reasons existing, often denied facilities normal even for his posts and repeatedly forced to work in the rank of Superintendent of Police under his far less talented and far less upright juniors from his own batch now in the rank of IGPs. Such atrocities are possible in Indian police these days. Reason for the reductio ad absurdum of the man management in Indian police of the present vintage to this scale is just jealousy and fear among the higher-ups of being overshadowed by his superior talents. His fault lies in the denial to approach the court of law in propugnation of own interests in spite of promptings from wellmeaning seniors and his preposterous pride in deciding that what are his, must come by themselves sans promptings from any quarters and philosophizing che sara, sara. He continues in the plight even now without promotions. This is an example of the criminal wastage of human talents apart from cruelty and crimes involved. Just thinking how best and to what advantages an efficient organisation would have made use of his talents by providing right incentives rather than curbing and crushing his normal opportunities makes this example of negative norms of the Indian police an eye opener. Such perversions and prevarications of the man management norms of epinosic dimensions must stop. It is a different story that he did not wither away like most in similar situations and made big name and brilliantly succeeded in other avenues. It is true that true talents cannot be hidden and even villainy of the top brass of the police has limits in curbing and crushing the talents of the fonctionnaire lower down. This is the brighter side of the spiel. Precious Man Power

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Every employee in any efficient organisation is a precious asset. This is not because labour comes at enormous cost, but because of the presence of innate potentialities in every person and its mammoth utility were they are adequately tapped. The problem lies in the need and competence to extract the potentialities and talents. Police organization has a long tail of hierarchy of seniors after seniors. The billion-dollar question is whether this long tail of seniority of the police department has any relevance as far as leadership and leadership qualities are concerned. The answer is a big “no”. Present Indian police is least bothered about the need of sound leadership and leadership qualities in its body as far as seniority goes and sadly leadership and seniority are synonymous in its diction. That must stop and the organisation must constitute per se a climacteric norm to enable the resorgimento of the Indian police to draw it out of its present chilling hiems. None realises the importance of every single human hand available as the USA does, and the care taken and the investment made on each hand in American armed forces are legendary. India and Indian police though cannot fully follow the American ideal because of its financial constraints and other reasons, the model sine dubio deserves avizefull consideration to aemule as a vaulting norm adapted to Indian milieu. Human being a natura rei is potential of extending and shrinking to any scope created for him. This is so also in work environment. A man or woman treated as lowly and dispensable as it is in the constabulary and other lowly ranks of the Indian police, shrinks au naturel to adjust to the space created for him, and expands and extends to be der Unsterbliche ubermensch if he or she is provided for and treated as such. Indian police lacks this insight to the human psyche and pays heavily in terms of human cost for the grave incompetence. How fast Indian police realises this fault, so good it is pour-soi. Maximum output out of minimum resources is the motto here. Maximum output should be the norms of manpower management in Indian police at all levels rather than going for blind increase in manpower strength at every possible occasion. High morale, high motivation and job contentment, high professional pride, adequate rights and responsibilities, reasonably sound infrastructure and logistics support are the claves for productive and perficient policing and make difference to the quality of the policing whether it is in Police Station levels or district police administration levels. This brings the issue of logistics support to the fore.

Logistics Support Logistics and infrastructure supports are the core of effective policing and also serve as the multiplier of manpower. Transport and communication logistics are the eyes and ears of the perficient policing. In the age of hi-tech crimes and criminals, high-level logistics support is sine qua non for the policing to be successful. Right logistics support has four dimensions or factors to be useful and effective in policing: quantity factor, quality factor, relevancy factor and time factor. Quantity factor covers availability of adequate logistics support; quality factor covers availability of latest and hi-tech logistics support; relevancy factor covers the need of logistics support being relevant to the needs of the policing; and time factor refers to the availability of the logistics support at right occasion and time. Inadequacy in any of these factors certain to affect the quality of the policing and needs foremost attention of the police leadership to keep the police and policing in top gear. In Indian situation, the principium of the four factors namely the quantity factor itself often is a major hurdle because of financial constraints and other problems though recent rise in terrorism alerted the bureaucratic and political leadership to awaken to this problem and make more and more logistics support available to police de grado in grado. But, the quality factor continues to be a major pain in the spine. Criminals are often found in India better equipped than the police as far as hi-tech gadgets and even crucial intelligence are concerned. Indian police lacks adequate organizational strength and expertise to keep up dated to the research explosions in the world market in hi-tech gadgets in transport, communication, information and weaponry systems. This shortfall needs to be attended on priority if Police Stations and district police administrations to be effective in defeating crime and criminals in their own games. Whatever done at present in this field are sporadic attempts sans systemic efforts. This lacuna needs to be rectified. Relevance and time factors are logistic maneuvers tout court involving human assessments and 31

decision making in the process of the policing and depends assez bien on human excellence involved and requires improved human qualities. That comes by practice, skill, training, commitment and mature leadership. These factors also need close attention in efforts to give quality policing to the country. Maintenance Any talk on logistics is incomplete without a discussion on maintenance, which is the weakest link in the mindset of the Indian psyche. Maintenance inherently is the byproduct of a disciplined mind that is anathema to the Indian psyche. Naturally Indian police is pathetically poor in maintenance aspect of whatever it does. One factor responsible for this perilous assuetude is the cost factor involved. The second factor that brings about this neglect of the maintenance structure in the organisation is the lack of appreciation of the need of the maintenance in running an organisation and carrying out its operations. This achilles’ heel of the Indian psyche holds its sway in police organisations also. Sound maintenance of the logistics infrastructures and other assets is sine qua non for sound policing and perhaps gets precedence in importance over acquiring new gadgets and assets. A sound police organisation just ne obliviscaris this crucial need that considerably contributes to the success of police operations. Financial Powers Police Stations as the nidus of police functions with considerable manpower and huge logistics support means in its possession and responsible for their maintenance perforce need considerable financial powers for themselves so that they can look after themselves without waiting for sanctions from above. This investment also boosts the confidence and self-reliance of the Police Stations as independent units apart from bringing respectability and accountability to them unlike now. The advantage here is both physical and psychological and needs priority attention. Strategic Location It be a Police Station, district police administration or any other police unit, its effective functioning depends very much on small details like its location and building also. They have to be located at a place decided upon after careful study of the issues involved and operational facility and convenience considered not only for the easy access to the public,but also for more crucial strategic reasons of operational considerations like facile movements, easy logistics support, access to hi-tech equipments, easy access to key manpower assets, convenience for secret operations et cetera. This important factor is often ignored in Indian police and it is common to find a Police Station situated in a locality outside its jurisdiction in urban areas and district police administration being located in an unplanned shabby rented building in a busy and strategically unsound locality. Easy availability often guides such decisions in Indian police. Such casual approaches in such key decisions should stop and proper norms should be laid to bring order in such key decisions and avoid concomitant mishaps. Norms are mere standards, or more precisely, standard customs to be set or evolved. Indian police as defined and structured by the British administration more than a century back served the British administration and its objectives in a far less complex milieu appreciably for nearly a century and later. But, in a situation of panta rhei, the antianus reticulation is ascensively becoming unfit and incompetent to the changing trends of the crime and criminality and may become entirely irrelevant to the changed complexities of crime and criminality if immediate corrective steps are not taken and new norms are evolved and set for the posterity. In a donnert police structure steeped in blinkers and mental inaction, the very idea of evolving fresh norms for manpower and logistics is a highly welcome initiative and deserves hearty plaudite.

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CHAPTER - 7

Logistics Industry: Global and Indian Perspectives

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Logistics Industry: Global and Indian Perspectives Logistics management is increasingly becoming a topic of interest among academicians and practitioners since it may lead to reduced operational costs, improved delivery performance and increased customer satisfaction levels. The global logistics industry is estimated to be worth USD 300 billion. Though most of the large service providers are headquartered in Europe, the biggest market is the US, which captures about one-third of the world market. The global logistics industry is characterized by high costs of operations, low margins, shortage of talent, infrastructural bottlenecks, demand from clients for investing in technology and providing one-stop solutions to all their needs, and consolidation through acquisitions, mergers and alliances. Though, in India, the industry is still in its infancy, there is immense potential for growth. The Indian logistics industry is currently plagued with low demand, poor infrastructure, high costs, government regulations etc. However, it is going to turn around on the back of robust GDP growth, globalization, FDI in logistics and increasing government support. This paper highlights the current state of the industry, including the dynamics and opportunities for growth, globally, in general, and in India, in particular, based on findings from surveys of logistics service providers, and users, of India and other countries.

Introduction Logistics and supply chain management (SCM) as an area of research has been getting increasing attention from academicians and practitioners over the last two decades since it may lead to reduced operational costs, improved delivery performance and increased customer satisfaction levels, thereby making an organization more competitive in terms of cost, quality, delivery and flexibility. The importance of logistics and SCM is increasing also due to globalization as more and more multi-national companies (MNC) are sourcing, manufacturing and distributing on a global scale, making their supply chains very complex to manage. However, outsourcing logistics activities to experienced logistics service providers (LSP), also known as third-party logistics (3PL) providers, may enable companies get very efficient and customized logistical support while themselves focusing on the core organizational activities. Today, there are many large multi-national LSPs that offer complete supply chain solutions across many diverse countries in terms of their socio-economic and political environments. Apart from core logistical activities such as transportation and warehousing, LSPs also offer value-added services such as customs clearance, freight forwarding, import/export management, inventory management, assembly/installation, packaging and labeling, distribution, after sales support, reverse logistics and so on. By outsourcing logistics, companies can leverage the expertise of LSPs while concentrating on their core competencies.

In literature, logistics and SCM are often used interchangeably, though there is a subtle difference 35

between the two. While SCM is more strategic in nature, logistics is more operationsoriented. 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 (Vrat, 1999; Seturam, 1999). 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 (Evans and Danks, 1998). The successive stages of evolution of logistics and SCM, the central characteristics of each stage, and the drivers of change are shown in Fig. 1.

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Literature on the logistics industry is abundant in the form of survey-based empirical research and reviews of extant literature. Notable surveys of logistics users of different countries include, among others, Langley et al. (2007) (North America, Latin America, Europe and AsiaPacific), Lieb and Bentz (2005) (North America), Lieb et al. (1993) (North America and Europe), Arroyo et al. (2006) (Mexico), Cilliers and Nagel (1994) (South Africa), Dapiran et al. (1996) (Australia), Mollenkopf and Dapiran (2005) (Australia and New Zealand), Kim (1996) (Korea), Bhatnagar et al. (1999) (Singapore), Sahay and Mohan (2006) (India), Sohail and Al-Abdali (2005) (Saudi Arabia), Sohail et al. (2005) (UAE) and Aktas and Ulengin (2005) (Turkey). In these surveys, logistics managers of user firms are asked to respond to issues such as reasons for outsourcing, number of activities outsourced and volume of outsourcing, logistics budget allocated to outsourcing, impact of outsourcing on cost, service level, customer satisfaction and employees, experience on collaboration with LSPs, expectations and future plans. All these surveys indicate growing needs of outsourcing, higher allocation of logistics budgets to outsourcing, and longer and deeper collaboration with LSPs. Long association with a service provider proves to be beneficial for both the user and the service provider. Building and sustaining a successful logistical alliance requires, besides mutual trust and transparency, a cultural synergy between two different organizations, clear internal assessment of logistics cost components and outsourcing only those services that are really needed, not giving up complete control of the supply chain, an unambiguous contract minutely detailing the roles of and expectations from the service provider, development of key performance indicators and incorporation of the same in the contract, close monitoring of the performance of the service provider, and constant dialogue and communication with the service provider. As far as the impacts of outsourcing are concerned, most of the firms have experienced either positive or very positive impacts on cost, service delivery and customer satisfaction level. The only negative impact of outsourcing that was reported was employee dissatisfaction, which may be caused due to the shift of responsibility, and hence authority, and probable downsizing of logistical workforce. The expectations of user firms range from offering more value-added services to globalization of operations by LSPs so that they could avail of services of a limited number of LSPs for all their logistical needs. For example, Exel Logistics has a contract with Motorola to manage large parts oits supply chain in Amsterdam, Chicago, Hong Kong and Singapore. Unilever is looking to Exel to provide warehousing services in Brazil, Mexico, the UK and the US (Bot and Neumann, 2003). IBM has outsourced the management of its service parts supply chains in North America and Europe to UPS while its finished goods supply chains are managed by Menlo Worldwide and Geodis in North America and Europe, respectively (Bowman, 2006). While literature from the perspectives of logistics users is abundant, the same from the perspectives of LSPs is scarce. In their survey, Lieb and Butner (2007) asked 22 top North American LSPs to respond to issues such as mergers and acquisitions, managing relationships, differentiating the company in the marketplace, adoption of new technologies, industry dynamics, and future prospects of the industry and the company. Respondents perceived more merger and acquisition activities, continued globalization and broadening of service offerings, more collaborative relationships, evolution of 37

niche players, gradual adoption of new technologies such as RFID (Radio Frequency Identification), continued problems of high-cost, low-margin and lack of management talent, and steady growth of revenue and profitability of both the industry and the company. The logistics industry is growing very fast in south-east Asian countries due to a shift of manufacturing base and increasing volumes of exports from these countries. A survey of Indian LSPs (Mitra, 2006) found the logistics industry in India very promising, currently growing over 20% per year. Though the estimated size of the industry is still miniscule (~ USD 1-1.5 billion) and the industry is still concentrated (20% of the respondents accounted for nearly 90% of the total revenues), there is immense potential for growth as the Indian GDP is growing at over 9% for the last couple of years compared to the world GDP growth rate of 3% and a lot of consolidation activities are taking place as more and more multi-national LSPs are expanding their presence in India through direct investments, acquisitions and alliances. The main roadblocks identified by the respondents to the growth of the industry in India were the lack of trust and awareness among Indian shippers and poor physical and communications infrastructure. However, it was also pointed out that Indian shippers are gradually realizing the benefits of outsourcing and the government is taking steps in the right direction for development of infrastructure. Reviews of extant literature on the logistics industry are available in Maloni and Carter (2006) and Selviaridis and Spring (2007). The organization of the paper is as follows. The next section gives an overview of the global logistics industry, an estimate of its size, and current status and dynamics of the industry. The subsequent section gives an overview of the Indian logistics industry, its competitive dynamics, and problems and prospects of the industry. Finally, managerial implications are presented in the concluding section. Global Logistics Industry This section gives an overview of the size of the global logistics industry and its current status and prevailing dynamics. Size of the 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%. US-based Armstrong & Associates, Inc. tracks the issues and trends in the world logistics market and in the US logistics market, in particular, in their annual surveys of top 25 global LSPs. According to the firm, the global logistics market sizes in 1992, 1996 and 2000 were USD 10 billion, USD 25 billion and USD 56 billion, respectively. In 2003 and 2004, the corresponding figures were USD270 billion and USD 333 billion, registering high growth rates. Though most of the large LSPs are headquartered in Europe, the US logistics market is the largest in the world capturing one-third of the world logistics market. In 2003, it was about USD 80 billion. In 2004, it grew to USD 89 billion, and in 2005, it registered an impressive growth rate of 16% to cross the USD 100 billion mark for the first time and reach USD 103.7 billion (Foster and Armstrong, 2004, 2005, 2006). However,

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considering the fact that the logistics market in the US is about 10% of its annual logistics cost (Foster and Armstrong, 2006), there is still immense potential for growth of 3PL in the US in particular, and in the world in general.

Current status and dynamics of the industry The extant literature on the logistics industry points to a number of issues that service providers have to address, such as pricing pressures, high costs of operations and low returns on investments, hiring andretaining talent, pressure from clients to broaden the range of service offerings and internationalize operations, demand for customized solutions and more value-added services, besides infrastructural bottlenecks and government regulations. Service providers complain that clients expect them to have the latest software, databases and ERP (Enterprise Resource Planning) packages, and invest in new technologies such as RFID and satellite-based real-time tracking systems. Clients perceive that these investments are part of the basic service package, and often do not want to match the same with increased payments for these additional services. Pressure from clients to broaden the range of service offerings and internationalize operations, has forced service providers to look for suitable alliances, mergers and acquisitions that help fill the gaps in service offerings, and industry verticals and geographic areas served, achieve economies of scale and enhance service providers’ capability to support international operations. Currently, the world logistics market is going through a consolidation phase. Tibbett & Britten Group of North America was acquired by Exel Logistics in August, 2004, and Deutsche Post World Net, parent company of DHL, took over Exel in December, 2005. Bax Global was taken over by Deutsche Bahn, parent company of Schenker, in November, 2005 while A. P. Möller acquired P&O Nedlloyd in February, 2006, and TNT Logistics was sold to Apollo Management L. P. in November, 2006. However, mergers and acquisitions have their own set of problems in terms of integration of two diverse business units. Carbone and Stone (2005) tracked the evolution of 20 leading European LSPs between 1998 and 2004 in terms of their approach to mergers, acquisitions and alliances, and found that although growth led to more coverage, integration of two different cultures was one of the most difficult challenges faced by these firms in the consolidation process. Recent trends in the logistics industry indicate that to be successful, service providers have to differentiate themselves from their competitors in terms of offering value-added services, focus on key customer accounts that have the potential to generate high profitability for a long term, enter into suitable alliances to complement the range of services offered and geographic areas served, and sell logistics services to clients’ suppliers and customers, thus leading to complete supply chain integration.

Indian Logistics Industry This section gives an overview of the size of the Indian logistics industry, its competitive dynamics and

future prospects. Size of the Indian logistics industry

The annual logistics cost in India is estimated to be 14% of the GDP, which translates into USD 140 billion assuming the GDP of India to be slightly over USD 1 trillion. Out of this USD 140 billion logistics cost, almost 99% is accounted for by the unorganized sector (such as owners of less than 5 trucks, affiliated to a broker or a transport company, small warehouse operators, customs brokers, freight forwarders, etc.), and slightly more than 1%, i.e. approximately USD 1.5 billion, is contributed

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by the organized sector. So, one can see that the logistics industry in India is in a nascent stage.

However, the industry is growing at a fast pace and if India can bring down its logistics cost from 14% to 9% of the GDP (level in the US), savings to the tune of USD 50 billion will be realized at the current GDP level, making Indian goods more competitive in the global market. Moreover, growth in the logistics sector would imply improved service delivery and customer satisfaction

leading to growth of export of Indian goods and potential for creation of job opportunities. Competitive dynamics and other issues The following problems existing in the Indian logistics industry make it unattractive for investments and also create entry barriers.

• Logistics is a high-cost, low-margin business. The problem of organized players is compoundedby unfair competition with unorganized players, who can get away without paying taxes and following operating norms stipulated in the Motor Vehicles Act such as quality of drivers and vehicles, volume and weight restrictions, etc. •

Economies of scale are absent in the Indian logistics industry. Even the organized sector that

contributes slightly more than 1% of the logistics cost, is highly fragmented. Existence of the

differential sales tax structure also brought in diseconomies of scale. Though VAT (Value Added Tax) has been implemented since April 1, 2005, failure in implementation of a uniform VAT structure across different states has let the problem persist even today.

• Apart from the non-uniform tax structure, Indian LSPs have to pay numerous other taxes, octrois, and face multiple check posts and police harassment. High costs of operation and delays involved in compliance with varying documentation requirements of different states make the business unattractive. On an average, a vehicle on Indian roads loses 24-48 hours in complying with paperwork and formalities at different check posts en route to a destination. Fuel worth USD 2.5 billion is spent on waiting at check posts annually. A vehicle that costs USD 30,000 pays USD 7,500 per annum in the form of various taxes, which include the excise duty on fuel. This is why freight cost is a major

component of the cost of a product in India. •

There is lack of trust and awareness among Indian shippers with regard to outsourcing logistics.

The volume of outsourcing by Indian shippers is presently very low (~ 10%) compared to the same for the developed countries (> 50%, sometimes as high as 80%). The unwillingness to outsource logistics on part

of Indian shippers may be attributed to skepticism about the possible benefits, perceived risk, and losing control, of sensitive organizational information, and vested interests in keeping logistics

activities in-house.

• Indian shippers expect LSPs to own quality assets, provide more value-added services and act as an integrated service provider, and institute world-class information systems for more visibility and

real-time tracking of shipments. However, they are unwilling to match the same with

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CHAPTER – 8 THE QUIET REVOLUTION

THE QUIET REVOLUTION Business technology has the power to enrich those recognize the benefits are all too often left watching the suc-cessful from the sidelines. This is even truer when technology shifts so rapidly that complacent business models cannot or will not adapt. What- ever the truth of evolution in the biological world, survival ofnational logistics has matured accordingly, allowin 41

good to be moved over ever-increasing distances within an ever-decreas-ing amount of time. As the complexity of global goods movement has grown, however, the mechanisms for keeping it working smoothly have not kept up with the inherent philosophy of the logistics science itself — namely efficiency. There is no arguing that the actual movement of goods today is more efficient than at anytime in history. However, for the most part, the philosophy of efficiency has not translated over into the processes behind the movements of those same goods. Only the whole system functions in the world of the fittest and natural selection are primary factors in the success of any business.

Innovation

As long as there has been business, tech- nology and its innovations have provided that extra evolutionary advantage that has allowed business leaders to succeed. From the invention of the abacus to the creation of modern telecommunications, technological innovation has been the primary tool of business evolution. Those that ride these waves of innovation surge forward; those that do not are left behind to play catch up. The logistics field has seen its own shareof technology revolutions, and in each case, the early adopters have scored early business victories. One needs to look no further than thecontainer revolution that began in the late 1950s. Vanguards of the technology such Malcom McLean and Matson Navigation surged so far ahead in the industry that it took others years to catch up. Today, another revolution is taking place in the logistics industry. While not as vis-ibly transformative as the shift from cargo nets to gantry cranes, this digital revolution promises to be as economically profound. Also unlike those technology shifts of the past, there are no cannon shots to mark this revolution — no stormings of proverbial Bastilles. This is the quiet groundswell revolution of Global Trade Management technology, and its proponents are rallying beneath the tricolor banner of “visibility, efficiency, and flexibility.” Like other key technologi-cal revolutions, it is also becoming clear that, barring the introduction of a furtherinnovation, this shift in the industry is inevitable. efficiency, while the parts seem to reside somewhere else. Consider this: Today, a cargo container can be moved from China to California in less time than it took Thomas Jefferson to travel the 250 miles from his home in Virginia to the First Continental Congress in Philadelphia circa 1770. And yet, the movement of this single container of goods may generate more paperwork than Jef-ferson himself created during his entire 16 month stay in Philadelphia, including the Declaration of Independence. Despite this tidal wave of data to move a single container, this data remains very pas-sive. It is listed, collated and stored, but until recently rarely available on demand in real time. Without the technology to transform this passive data into active information, visibility remains an elusive goal of the industry. Lacking this visibility, it remains a challenge for logistics firms to maximize their responsiveness and flexibility to both customers and their own business. Revolutionary 42

However, Global Trade Management technology — namely GTM software and information systems — is providing solu-tions to all of these problems. Global Trade Management technology seeks to streamline all aspects of a global supply chain, from orders to logistics to set-tlement activities to financials — all in the name of improving operating efficiencies and cash flows. The promise is drasticallylower cost supplies and operations, withouta concomitant increase in costs.

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CHAPTER - 9 GLOBAL LOGISTICS

Global Logistics 1.1 INTRODUCTION 1.1 Evolution of Logistics The evolution of logistics 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. 44

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. Logistics involves getting, in the right way, the right product, in the right quantity and right quality, in the right place at the right time, for the right customer at the right cost. The logistic network consists of the suppliers, the retailer and the users. The purpose of an integrated logistic network in a supply chain is to fulfill customer orders through providing place utility to deliver products and services to end users. The place utility is achieved by managing a number of key functions of a supply chain. The functions include: • • • • • •

Demand management Inventory management Transportation Warehousing Order processing Information Management

Logistics is a key enabler of supply chain collaboration. Improving performance in this field allows supply chains to increase their efficiency significantly and help to create innovations in different areas. In this context, an important task is to find structures and approaches which enable all types of performance management in logistics and supply chains for a better fulfillment of customer needs. Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. There are four major decision areas in supply chain management: 1) Location 2) Production 3) Inventory 4) Transportation (distribution) And there are both strategic and operational elements in each of these decision areas. Distinguishing Logistics and SCM 45

In literature, logistics and SCM are often used interchangeably, though there is a subtle difference between the two. SCM is more strategic in nature whereas logistics is more operations-oriented. While SCM deals more with the linkages in the chain, contracts and relationships, supplier selection, information and financial flows besides materials flows, creating new facilities such as plants, warehouses and distribution centre’s, and broader issues such as society, economy, government and environment, the scope of logistics is more or less confined to the routine job of transportation and storage of goods. However, if one deeply ponders, one may realize that logistics is the core of SCM, and if logistics fails, the whole chain snaps. Though logistics deals with mundane vehicles, warehouses, layouts, material handling equipment, Motor, Vehicles Act, toll tax, sales tax, documentation etc., efficient management of it has the potential to make the chain taut and agile. Therefore, there is growing interest in logistics, and hence in SCM, around the world. GLOBAL LOGISTICS AND SCM Until a few years ago, logistics was rarely a subject discussed in the executive suites of large corporations. But today, in the highly competitive global world, logistics has moved from the basement to the boardroom. Initially the concept was to increase sales. Today, the concept goes beyond that to include managing costs. And the most obvious factor, why global logistics is now getting great attention is this four letter word- cost. Logistics is applicable to every industry; be it construction, express delivery, automobiles, management of airports, retail, or any other. We increasingly find goods from all over the world around us-Korean cars, Italian fashion goods, Swiss cheese, South African wines, Indian garments, Japanese electronics and more. The focus remains not only on getting them available locally but getting the right product, at the right time, in the right quantity, at the right place, in the right condition, at the right cost. This is indeed what gives a company an edge over its competitors-and is increasingly the biggest challenge they face. One of the most complex jobs today is of a logistics and supply chain manager. The rapid reduction of international trade barriers has led to an equally rapid growth of the logistics industry. The globalization that is a by-product of extensive use of the Internet has increased the need for a flexible logistics infrastructure to support a global supply chain, enabling the movement of goods from a growing number of source locations to meet market demand. The logistics sector comprises two primary segments – the shipper community (defined as those organizations who manufacture and sell products) and the service provider community (those organizations who provide transportation, distribution and related services). Although each of these segments has a different perspective, the key enabler for logistics excellence is information. The real-time exchange of this information, to include all parties, is a key enabler to supply chain management. This facilitates supply process visibility, exception notification, advanced receipt of shipment line item details as well as proof of delivery information.

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Global Supply Chain Management Because of competitive pressures in the global marketplace, companies are rapidly migrating to low-cost sources of labour and materials, which are typically located in countries that also represent emerging market opportunities. But the speed of this change may bring challenges associated with escalating shipping costs and increased supply chain risk, and these challenges could exceed a company’s internal skill and resource capacity. If we are adopting global sourcing practices, we may not yet have the foreign trade experience necessary to manage regulatory compliance and related global supply chain management complexities. For example, multiple, autonomous business units within an organization can contribute to a fragmented logistics process as well as create missed opportunities for leveraging economies-of-scale. Individual business units may also lack the necessary economies-ofscale needed to establish a competitive foothold and gain sufficient influence in emerging markets. Balancing inbound and outbound supply chain logistics requires a comprehensive strategy that incorporates all the key functions of a supply chain to accelerate or expand sourcing from emerging markets. This horizontally integrated approach also helps you make strategic decisions regarding partnerships, shipping and other factors, to help ensure that savings from global sourcing are not eroded by increased logistics costs. Even more significantly, such a strategy can enable you to go beyond sourcing to position your organization to leverage your logistics capabilities to sell and distribute products within those emerging markets. Key Players in Logistics Arena In addition to the shipping community, categorized as organizations that consume transportation and distribution services, the logistics market place is dominated by transportation providers, storage providers and Third Party Logistics Providers. A growing trend for organizations focused on managing their supply chains is to outsource part or all of the logistics functions to Third Party Logistics Providers – 3PL’s. By definition, these are independent companies that design, implement and/or manage a client’s supply chain logistics needs. The key differentiating factor between a 3PL and a transportation provider is that a 3PL provider’s primary value-add is based on information and knowledge, versus providing an undifferentiated service at the lowest costs. In addition to providing expertise, a key to managing the complexities of a global supply chain with regulatory and other issues, 3PL providers leverage their infrastructure and freight rate negotiations over a large base, providing cost advantages. Additionally, for companies experiencing seasonal demand for their product, outsourcing the logistics function transforms a fixed cost into a variable cost. The transportation industry includes water transportation, air transportation, motor freight and railroads. In an effort to enhance customer service, transportation providers are upgrading from telephone/fax to information technology. In many cases a combination of web-enabling technologies are used to receive shipment instructions, track and trace

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shipments and compile/post statistical information. Electronic commerce, the Internet and the World Wide Web are key enablers for IT strategies. In addition to the networks of storage facilities operated by the shipping and 3PL community, there are commercial warehouse operators who provide storage facilities for both dry goods and temperature controlled product. These can be either contract warehouses, or public warehousing facilities. Contract warehousing provides storage facilities to a single client, normally under a long-term contract. Services provided could include additional value added services such as kitting, configuration etc. This is a growth area, due in large part to the requirements of web-based storefronts. Public warehouses provide storage for a variety of clients, either on a short term, or seasonal basis, or on a longer term. In addition to storage and transportation management these facilities also provide valueadded services as required. Temperature Controlled Warehousing/Frozen Storage facilities are similar to both public and contract warehouses, the primary difference being that they are temperature controlled, based on product requirements – refrigerated, frozen etc. This type of storage is extensively used in the food industry and in response to market demand is increasing their value-added service offerings. In addition to the traditional warehouse facilities, there are specialized facilities that offer national parts distribution, or storage and distribution for products with low velocity or those of a hazardous nature.

Indian Logistics Industry The annual logistics cost in India is estimated to be 14% of the GDP, which translates into USD 140 billion assuming the GDP of India to be slightly over USD 1 trillion. Out of this USD 140 billion logistics cost, almost 99% is accounted for by the unorganized sector (such as owners of less than 5 trucks, affiliated to a broker or a transport company, small warehouse operators, customs brokers, freight forwarders, etc.), and slightly more than 1%, i.e. approximately USD 1.5 billion, is contributed by the organized sector. So, one can see that the logistics industry in India is in a nascent stage. However, the industry is growing at a fast pace and if India can bring down its logistics cost from 14% to 9% of the GDP (level in the US), savings to the tune of USD 50 billion will be realized at the current GDP level, making Indian goods more competitive in the global market. Moreover, growth in the logistics sector would imply improved service delivery and customer satisfaction leading to growth of export of Indian goods and potential for creation of job opportunities. Several problems existing in the Indian logistics industry make it unattractive for investments and also create entry barriers. Some problems are mentioned here. Logistics is a high-cost, low-margin business. The problem of organized players is compounded by unfair competition with unorganized players, who can get away without paying taxes and following operating norms stipulated in the Motor Vehicles Act such as quality of drivers and vehicles, volume and weight restrictions, etc. Economies of scale are absent in the Indian logistics industry. Even the organized sector that contributes slightly more than 1% of the logistics cost, is highly fragmented. Existence of the differential sales tax structure also brought in diseconomies of scale. There is lack of trust and awareness among Indian shippers with regard to outsourcing logistics. 48

The volume of outsourcing by Indian shippers is presently very low (~ 10%) compared to the same for the developed countries (> 50%, sometimes as high as 80%). Indian freight forwarders face stiff competition from multi-national freight forwarders for international freight movement. MNCs, because of their size and operations in many countries, are able to offer low freight rates and extend credit for long periods. Indian freight forwarders, on the other hand, because of their smaller size and lack of access to cheap capital, are not able to match the same. Service tax levied on logistics service fees (currently 12.36% with educational cess) may make outsourcing costly and outweigh the possible benefits. There is lack of skilled and knowledgeable manpower in the logistics sector. Management graduates do not consider logistics as a prime job.

Changing Logistics Landscape in India India’s container trade has been growing at around 15 per cent over the past five years. That means the logistics services business will be growing at a multiple of the box trade, probably around 20 per cent and more per year. The growth in demand presents significant opportunities for the logistics industry, as also challenges. India’s current trade profile provides important clues about the development of logistics industry. In some areas, notably, apparel exports, there is vital emphasis on logistics and speed to market for the delivery of time-dependent ‘perishable’ goods. For the bulk of trade into and out of India, it is not the case; relatively inefficient, individual transport services can be cobbled together to get goods to the market. This will change. As the trade profile changes, so will the need for more reliable, seamless supply chain solutions that offer real-time visibility along the pipeline. The key driver of demand for world-class logistics services is a critical mass of MNCs whose bottomline success requires low-cost manufacturing locations, connected to highly efficient supply lines. Secondly, some pieces of hardware are either missing or not up to the global standards. Ports, for example, are for the most part choked up or not set up for increased container transportation. Road and rail connectivity is patchy and waterways, while exciting, are not yet big on the radar screen as far as volumes are concerned. Add to that a lack of capabilities or competition in some segments of the supply chain, absence of common standards for equipment and technology, and intra-provincial barriers. These are the key factors playing on the minds of MNCs looking for alternative lower-cost sourcing locations or wanting to reduce their dependence on China and other Asian countries. Broadly the elements of integrated supply chain include: • • • • • • • •

Supply chain management design International ocean/air transportation Consolidation/Distribution Document Delivery Deconsolidation distribution Multimodal transportation Warehousing Delivery to point-of-sale

An effective logistics provider should have the expertise and global connectivity to manage cargo through an integrated network from the time it leaves the warehouse to delivery at destination to customer locations and distribution centers. Expertise in freight analysis, audit and payment, plus service-level reporting is the customer’s weapon in the everyday battle to move freight more efficiently. 49

Need for Integration There is a vital need for integration so that customers can achieve their transportation requirements while maximizing the value of money spent in getting their goods to market. This requires better use of existing assets and industry cooperation, and greater competition. Companies aiming to be an integrated solutions provider have to tackle this by extending their supply chain capabilities. Every point of service along the chain must have the capacity for cargoes to flow through efficiently—at the lowest cost and greatest velocity—or it will become a bottleneck and has a cost or time impact on customers. Having bigger ships may ease the shortage of space at sea, but shift the pressure on to the next point in the chain. The global transportation companies of tomorrow must be able to offer highly integrated and flexible solutions that take into account the increasing cyclicality and volatility in operations across industries. This is making companies vulnerable to interruptions in their supply lines. A weak or weakening US dollar, lack of consumer confidence in the West, surge in world oil prices, terrorism or geopolitical concerns—these are all very real factors influencing the design of supply chain solutions in today’s economically connected world. New technologies such as RFID, standardized data processing formats and new supply chain tools and ecommerce capabilities will, undoubtedly, open up new ways to mange movement and storage of goods. INTERNATIONAL LOGISTICS AND SCM International logistics is the design and management of a system that controls the forward and reverse flow of materials, services and information into, through and out of the international corporation. When shipping a product overseas, the exporter must be aware of packing, labeling, documentation, and insurance requirements. Most exporters rely on an international freight forwarder to perform these services because of the multitude of considerations involved in physically exporting goods. Freight Forwarder An international freight forwarder is an agent for the exporter in moving cargo to an overseas destination. Whether an exporter is large or small, the weight of the cargo light or heavy, a freight forwarder can take care of cargo from “dock to door,” thus freeing the exporter from dealing with many logistics-related details. Schedule B and HS Numbers The Harmonized System (HS) assigns a 6 digit number to each product that is traded internationally. Each country can assign, on its own, four additional numbers, making the entire number 10 digits. The United States does this with its Schedule B system.

Tariffs and Import Fees:

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Tariffs or duties are a tax levied by governments on the value of products imported from one country into another. Before you export to any country, you need to determine what the tariff rate is on your product(s) as well as any import fees for that country. Common Export Documents There are many common export documents that have to accompany export shipments including the Shipper’s Export Declaration, invoices, packing lists, certificates of origin and the list goes on. Through the implementation of international logistics, the firm can implement cost-saving programs such as just-in-time (JIT), electronic data interchange (EDI), and early supplier involvement (ESI). The two phases of the movement of materials include: Materials management or the timely movement of materials, parts, and supplies; Physical distribution or the movement of the firm’s physical product to its customers.

Important Logistics Issues Surrounding Corporate Management Recently Japanese companies have actively deployed manufacturing bases overseas. Such globalization of corporate activities has been supported by IT represented by the Internet and logistics. The establishment of systems and structures quickly responding to changes by visualizing worldwide production and inventory through the utilization of IT is crucial in realizing efficient global supply chains. The international distribution connecting each function and player of globally conducted procurement, production, and sales also plays an extremely important role. There has been a great expectation for the advancement of 3PL (3rd Party Logistics) businesses as a counterpart of global SCM (Supply Chain Management). In the globalization of corporate activities, efficient and seamless logistics is necessary and when it is realized, it would make a huge contribution to corporate competitiveness. Since logistics is a foundation which supports not only economic activities, but also people’s lives, the viewpoint of providing safety and ease of mind to consumers is essential. Therefore, the important issues include: securing of safety by eliminating accidents during transportation and by strictly complying with proper product handling procedures throughout distribution processes, and pursuing ease of mind such as with the development of the product traceability system and/or others. It is necessary to implement a safe and efficient international distribution mechanism in response to the enhancement of international security. COMPARISON BETWEEN DOMESTIC AND INTERNATIONAL LOGISTICS The national logistics operator serving the indigenous market usually has the advantage of being aware of the structure of the market, its infrastructure and all its elements, in particular, regulations, all the costing elements from manufacturer/production to the distributor/consumer, the supply chain under the national government,, a common language, a range of economic/industrial indices indicating the changing market trends, taxation levels, 51

employment law, consumer protection and competitive law. Hence the logistics operator remains focused on one country, but must be equally conscious of inwards investment whereby overseas companies penetrate the market with their goods and services. The international logistics operator in designing the supply chain permeates several countries and may extend to several thousand miles from Australia/China/India/Malaysia to Europe and North America and vice versa. It is a distant market and embraces numerous conventions and complex regulations especially in the area of trade law, international finance, market entry regulations, customs, taxation, language, transport regulations etc. The international logistics operator must be competent in all areas of the global supply chain. A synergy must be developed with the supplier and distributer together with all elements of the supply chain, carrier, handling, customs, finance, security, warehouse etc. Transparency is essential throughout the supply chain together with advanced software.

Management of International Logistics Centralized Logistics Management In international logistics, the existence of a headquarters staff that retains decision-making power over logistics is important. To avoid internal problems, both headquarters staff and local management should report to one person. This individual can contribute an objective view when inevitable conflicts arise in international logistics coordination. Decentralized Logistics Management: When a firm serves many diverse international markets, total centralization might leave the firm unresponsive to local adaptation needs. If each subsidiary is made a profit center in itself, each one carries the full responsibility for its performance. Once products are within a specific market, increased input from local logistics operations should be expected and encouraged. Outsourcing Logistics Services: The systematic outsourcing of logistics capabilities is a third option. By collaborating with transportation firms, private warehouses, or other specialists, corporate resources can be concentrated on the firm’s core product. One-stop logistics allows shippers to buy all the transportation modes and functional services from a single carrier.

Transportation Infrastructure A firm’s logistics platform is determined by a location’s ease and convenience of market reach under favorable cost circumstances. The public sector’s investment priorities, safety regulations, tax incentives, and transport policies can have major effects on the logistics decisions of firms. The logistics manager must learn about existing and planned infrastructures abroad and at home and factor them into the firm’s structure. Some of the international transportation issues are: 52

• • • •

Availability of transportation modes- Overland shipping, ocean shipping, air shipping Transportation infrastructure- roads, rail lines, airports, seaports, pipelines Choice of modes- transit time, predictability, cost Non economic factors- Government involvement, UNCTAD

Export Documentation A bill of landing is a contract between the exporter and the carrier indicating that the carrier has accepted responsibility for the goods and will provide transportation in return for payment. A commercial invoice is a bill for the goods stating basic information about the transaction, including a description of the merchandise, total cost of the goods sold, addresses of the shipper and seller, and delivery and payment terms. A freight forwarder specializes in handling export documentation. FUTURE PROSPECTS OF LOGISTICS Facing the worldwide competition, the improvement of logistics system should be advanced by both private companies and government. There will be three revolutions in business that have substantial impacts on the purchasing and supply strategies of the manufacturing sectors. These three revolutions are: (1) The globalisation of trade (2) The coming of the information era (3) More demanding consumers and continuously changing consumer preferences. The main characteristics of future logistics development are: Government role: To keep competitiveness of industries, the government has to lead the way to assist the logistics industries. For instance, the idea of freight village of city logistics provides the environment to promote logistics efficiency and to reduce operation costs. However it involves large of investments and some problems relating laws and national policies. Without the lead and support of government, achieving the plan is difficult. Growth of international goods transport: The up-growth of international freight transport is contributed by several factors. Firstly, the blossoming of E-commerce pushes ahead the international business activities. Secondly, the change of production strategy needs international cooperation, e.g. importing the semi-finished products from countries with cheaper human resources to those with higher technology to assemble the final goods. Thirdly, the pressure of globalised market, such as World Trade Organization (WTO), pushes local industries to promote themselves to reach an international standard and face the worldwide competition. 53

Improvement of services: Providing a good customer service becomes a necessary requirement of business operation with the intense competition of global market. The quality of services is the main factor to affect consuming behaviour among the enterprises with high similarity. The service systems involve several developed techniques now, such as Efficient Consumer Response (ECR) and Quick Response (QR). In the near future, more new techniques would be applied in providing better services for customers. Revolution of logistics operation: IT techniques and its products bring efficiency and fluency to the logistics systems. Radio Frequency ID (RFID) is one of these techniques. The main difference between the bar-code system and RFID is that RFID does not need the action of scanning the barcode on goods. RFID could save manual operation time dramatically. RFID systems could sense the amount of goods input in the tags automatically and immediately when the costumers push their trolley through the exit Shorter product life cycle: With the current trend, the merchandise design is changing day by day, and therefore, the product life cycle is shorter and shorter, especially in computer science. To confront the impacts, logistics system must improve its efficiency and reliability of goods delivery. Otherwise an inappropriate logistics system would hinder the competitiveness of new products and the business profits. Improvement of logistics facilities: The advancement and development of logistics are based on several techniques and complete theories. High-tech facilities and systems, e.g. ITS, could bring more possibilities and advantages to logistics. For example, the improvement of related facilities, e.g. Forklift Trucks, is necessary for transport efficiency. In the future, factory automation is the main target for the whole supply-chain procedures. It could help to improve efficiency and also reduce the operation costs. Channel cooperation between companies: In order to save the logistics costs, a key concept is t maximize the usage of available transport capacity. Integrating the logistics demands between numerous departments helps achieve this purpose. In practice, a conglomerate could develop its own logistics service for the branches. For some medium size companies, they could cooperate transport channels with others. Specialized logistics delivery: One of the notable trends of logistics industries is specialized delivery service. For instance, delivering fresh food from the place of origin needs lowtemperature containers. Compute chips, gases and petroleum need particular conveyances to carry. These demands are rising since the products became more and more delicate. Logistics centres: The development of logistics centres is good for industry promotion and the development of national economic system. Logistics centres could successfully shorten the distance between production and marketing vertically and also integrate various industries horizontally, and thus decrease the costs. Governments can propose special areas for storehouses and logistics to reduce land acquisition. The future logistics will cooperate ecommerce, the Internet and the newly door-to-door service to create new business prospects. Freight transport: The alliance between middle-small size delivery companies is an important trend in the future. The strategy could help to expand service areas and increase service quality, and meanwhile raise the loads of single trips to reduce delivery costs. 54

Logistics service providers should recognize that business will change. The reduced financial value of companies can create an incentive to buy competitors to fill niches in geography or industries served. This excludes issues as to funding availability and the ability to debt leverage being down significantly at present. But if their customers transform their businesses, then any acquisitions may miss the shifts in geographies or industries. The future that evolves from the present economic and financial problems can be significantly different that what has been going on. Businesses will change. Supply chain management will change. This challenge will create opportunities for visionaries and risk takers.

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CHAPTER - 10 SCANWELL LOGISTICS GROUPS

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SCANWELL LOGISTICS GROUPS

A Logistics Solutions Provider Scanwell Logistics is one of the leading companies in the global logistics industry. Scanwell offers a wide range of customized solutions covering international freight forwarding, inland distribution and supply chain logistics support. They transport shipments rapidly, safely and on-time all over the world. Our facilitated, comprehensive global network gives us worldwide experience with a strong local presence and unique understandings of our customer’s accommodation. Scanwell Logistics’ network is dedicated to providing consistent logistics service that goes well beyond the expectations of our customers. Together we will continue to grow and enjoy a profitable relationship for years to come.

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SERVICES & SOLUTIONS: 

Air Freight



Ocean Freight

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Supply Chain Logistics Support

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Commodity Logistics Solutions

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Industrial Project Management

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Air Freight

Scanwell Logistics provides a worldwide network for all of your air freight needs, with timedefined and guaranteed services supported by preferred carriers. We offer competitive rates for all time and cost requirements. A core element of our air freight service offering is the ability to move single or complex shipments, at any time and to any destination along with our flexible approach and a personalized service to all customers. Our air f reight services and capabilities include:  Airport-to-Airport and Door-to-door  Consolidation Service and Facilitate Network Functions  Licensed Broker for Special Handling of DG/High Values/Temperature-controlled  Standard Import/Export Clearance with Customs Compliance  Documents/Cargo Conformity, Liens and Corrections  Shipment Track & Trace  Cargo Security and Insurance Coverage

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Ocean Freight

Scanwell Logistics offers speedy and flexible ocean freight services. Our forwarding services start with analysis of the transportation task. This allows us to find the optimal route coupled with the best time-to-cost variation. We handle small non-containerized cargo, consolidate Less than Container Loads (LCL) and organized Full Container Load shipments (FCL) - all according to your needs. A comprehensive range of services & capabilities include:  FCL and LCL Services  Heavy/Odd-sized Cargo  Break-bulk and Special Charters  Customs Management and EDI Connection  Optimization of Sea/Air Combined Modal  Buyers’ Consolidation  Documents/Cargo Conformity, Liens and Corrections  Shipment Track & Trace  Cargo Security and Insurance Coverage

Supply Chain Logistics Support: As a leading-edged logistics provider, Scanwell offers a full suite of logistics activities across the entire supply chain。 Integrated into your own supply 60

chain management process. Our services ensure a unique and effective customer program , tailored to customer’s specific business requirements. Our logistics services is intended for medium and large multinational companies with complex supply chain processes. We add value to logistics functions by using our expertise and systems within your environment to provide you with increased visibility and improved supply chain management. These values include customer accommodation to customer’s marketing supports as well as VMI / JIT modals to their manufacturing supports.        

Supply Chain Optimization Customer Accommodation Design Freight & Transportation Management Warehousing/Inventory Management Specific Customer Service Solution Our IT Capabilities Value Adds Towards Visibility

Industrial Project Logistics: Scanwell’s industrial project logistics services provide tailor-made transportation and handling solutions to customs working in industrial plants, engineering & construction, power/energy and etc.. With quality-driven approach, experience in risk management & sophisticated environment, our specialized teams provide reliable performance to your turn-key project  Project Logistics Management  Project Cargo Transportation  Project Cargo Logistics Monitoring  Heavy Load Installation

Commodity Logistics Solutions 61

Customers in all geographies and sectors face supply chain challenges that impact business performance and competitive positioning. Scanwell recognizes the very importance of serving specialist global industry sectors and need for an commodity-focused approach to the supply chain Our Special Management Teams expertise in below industries:  Automotive Parts  Cosmetics & Component Parts  Life Science and Healthcare  Fashion, Textiles and Garments Accessories

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Scanwell Logistics in China: ✔

Scanwell China’s HQ

✔ Scanwell China Team Member ✔

Scanwell China’s Network

✔

Operation Summary

✔

Logistics Facilities

✔

Transportation Management System

✔

Distribution & Warehouse

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Project Cargo Management Approaches

Scanwell China’s Network Scanwell has 14 own offices in mainland China with Headquarter located in Shanghai and others in: Beijing, Qingdao, Dalian, Tianjin, Nanjing, Hangzhou, Nantong, Ningbo, Suzhou, Shenzhen, Xiamen, Fuzhou, Guangzhou. We are ISO9001:2000 certified by CQC and IQNET and our quality services are provided by over 700 professionals. Allied with quality Local Logistics Providers in major cities of China, Scanwell’s daily operation covering over 60 cities with our transportation network and back up with warehouse services.

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SCANWELL CHINA OPERATION SUMMARY:

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CHAPTER – 11

CONCLUSION

CONCLUSION 66

In this scheme of things, logistics is therefore essentially an integrative concept that seeks to develop a system wide view of the firm. It is fundamentally a planning concept that seeks to create a framework through which the needs of the manufacturing strategy and plan, which in turn links into a strategy and plan for procurement Logistics is an important operation that helps the organization to manage his business in today’s competitive world. While doing this project, we came to know that how much important is the logistic to the organization. It helps to deal with the problem and issue and provide immediate and medium term solution and improves performance.

BIBLIOGRAPHY 67

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WWW.GOOGLE.COM (THE FREE ENCYCLOPEDIA) WWW.ANSWERS.COM WWW.BMSCAMPUS.COM (FREE DOWNLOADING PROJECTS) TEXTBOOK- ELEMENTS OF LOGISTICS IN BUSINESS (HIMALAYA PUBLICATION) MATERIAL MANAGEMENT (HIMALAYA APUBLICTION)

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