Logistics Industry Ground Realities

8/4/2019 Logistics Industry Ground Realities

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Companies, whoneed storage

Land Owners

Investors

3rd partyLogistics

ServiceProviders

Transporters

InfrastructureProviders

Pre FabricatedBuildingIndustry

MaterialHandling

Equipmentmanufacturer

Rack & StorageSolution

companies

IT sector , ERPbased solutions.

Supply ChainConsultants

Academia in

future

STAKEHOLDERS IN LOGISTICS SECTOR


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WAREHOUSING

DISTRIBUTIONINTERNATIONAL

LOGISTICS

Can be present at any level of Supply Chain

Raw Materials or Finished Goods

Poor Design reduces efficiency by almost 20%.


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Strengths

1. Consumer goods on rise.

2. Burgeoning middle class.

3. Higher GDP growth.

4. Manpower Availability.

5. Land availability.

6. Rising Industrial Production.

Weaknesses

1. Lack of IT usage in Logistics.

2. Unprofessional warehouse

management.3. Low quality existing infrastructure.

4. Lack of suitable skilled labour.

Opportunities

1. Market at Nacsent stage.2. Continuously growing SKUs in FMCG sector.

3. Free TradeWarehousing Zones coming up.

4. Delhi Mumbai Industrial Corridor in progress.

5. Increasing trade and retail demand.

6. Air Cargo Complexes being set up.

7. Outsourcing to specialists.8. Phasing out of CST.

Threats

1. Lack of awareness among peopleregarding warehouses.

2. Industry unwilling to spend onwarehouses.

3. Labored GST implementation.

4. Geographical size and diversity.

5. Security concerns.

6. Rising Inflation

SWOTINDIA


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Logistics Service Providers( LSPs), strong in certain regions

and not pan India.

Ideal Single Window Service still not achieved by any player.

Companies need to outsource pan country services to different

players.

Service Provider and actual Logistics carrier different peoplein many cases. E.g. Transportation for Milk Runs.

LSP cant take up space until a long term contract from consumer.

Solution lies in Plug and Play & Pay per Use business models.

Service level ofLSPs is the Key Deciding factor in awarding the

contracts in future and not the rentals and no. of warehouses.


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Returns expected are good, but will take time . growth bound to happen in phases and distributed over

regions.

Land prices may soar sooner or later.

Hotspots : Mumbai , Delhi NCR , Kolkata, Nagpur.

For lower volumes : Ahmedabad, Ludhiana, Bangalore,

Hyderabad.


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Manpower training is required. HR issues and less career growth in this field as of now.

Warehousing is being viewed as just STORAGE function.

Its treated like a secondary activity and people want to spend

less on it.

Ignorance about cost benefits. Clearance and Forwarding agent sort of model.

Warehouses acting as just depots.

Automation, vertical space utilisation and warehouse

management systems unheard of.


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Para

meter

Subparameter HR DL RJ UP WB GJ MH AP TN KN

Infra Road M H H M M H H M H H

Power L H L L H H H M M M

Rail M H M H H M H M H H

Airport L H L M M M H H H H

Seaport L L L L H H H H H M

GOVT Reforms M H M L H H M M M L

Proactiveness L H M L H H M M M L

LAND H H M M H L H M H M

Proximity H H M M H M H M M M


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The Warehousing Act 2007

Current spend : INR 4.5 trillion on Logistics related Infra, 13% of GDP.

Inventory Carrying, warehousing and order processing = 57% of this amount.

Only 31% Indian companies outsource logistics, globally 75% of companies.

INR 14 trillion to be spent on road connectivity, improving existing ports & creating new ports

from 2005-6 to 2011-12.

Warehousing (developmental & Regulation) Act was formed in 2007 to ensure that

warehousing is being viewed as a critical component to achieve Operational Effectiveness across

different sectors.

Had to be enacted in 2010.


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The act enables banks & financial institutions to step into commodities andwarehousing sector. Some of the key benefits are :

Higher %age participation from private sector including development of modern

warehousing infrastructure.

Boosts agricultural sector as now we can store the produce.

Greater transparency, low costs in rural areas, efficient supply chains, better price

risk management, rewards for better quality and management.

Attracting large private investments.

Electronic Title Transfer.

Regulation of business by registering of warehouses issuing negotiable warehouse

receipts.


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An FTWZ is like an SEZ , but with special focus on trade related infrastructure.

FTWZs will be set up only near seaports, airports or dry ports (rail/road hubs).

FTWZ is a special case of SEZ only.

Developer can SALE/ LEASE/ RENT OUT warehouses/workshops/officespaces and other facilities to TRADERS/EXPORTERS.

Permission letter issuance for Development, Operation & Maintenance.

Approval required from BoA of DoC ( Department of Commerce)

Can be set up by a PSU/ PLC (Private Limited Company) or a JV in technicalcollaboration with experienced Infra Developers.


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100% FDI allowed for development of FTWZ.

Minimum Area to be developed : 0.5 million square metres.

Minimum outlay for projects : INR 100 crore.

Supplier of material into the FTWZ will be treated as physical exports for the

Domestic Tariff Area (DTA) suppliers.

FTWZ envisage duty free import of all goods for warehousing.

Custom duty regulations same as SEZs.

Packing and repacking without processig can take place inside a FTWZ.

As per Section 80 IA of I-Tax Act : 1. FTWZ is exempted from Service Tax.

2. Free forex currency transactions i.e. No amount of money need not be paid as

commision for forex conversion

3. Benefits as applicable to SEZs.


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Companies will move from tax efficient distribution networks toOptimised Distribution Networks.

Hub and Spoke model will become widely prevalent like in USA.

Large Scale Consolidation ofLogistics Sector and thus Pan India

presence ensurable.

Modernization of Warehouses possible.

Big companies planning to close their regional warehouses owing to

GST.

Instead they are building bigger and more sophisticated warehouses

and logistics parks.


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Market feasibility or need gap analysis is done keeping in mind thereal Estate Perspective to identify the pre catchment areas or the

markets. The pre identification criteria are :-

Connectivity and linkages with multiple markets.

City profile and growth/ development trends.

Air/Sea Port Infrastructure.

Logistics infrastructure.

Industry Profile.

Retail profile Present and Upcoming. Real Estate Scenario & Land Availability/costs.

Freight and cargo routes.

Demand Type, Value, Volume.


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Warehouse setup is a very crucial and strategic decision to make as it isan irreversible process.

A slight mistake will land up in full loss. So, all the pros and cons of the

LOCATION where you want to setup have to be viewed very carefully.

Site selection process is a big project in itself and has to be well

researched and minutely planned.

Parameters involved in this decision making :-

1. Serviceability to a specific market.

2. Cost benefit analysis of market or tenant it serves.

3. Value for Money Proposition has to be achieved both for tenant and

for service provider.


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Temperature& Humidity

Control

Very NarrowAisle

StorageLighting Office space

Dust FreeEnvironment

ParkingDemarcated

aisles andBays

Health,Safety , Pest

control

Heavy DutyRacking

CrossDockingfacility

High rech

stackers Mezzanines Security IT and RFID

Tri-Mix

Flooring

Automatic Dock LevellersCommutability of location,

proximity to highways


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Location Specific Strategy.

SmallWarehouse Projects.

Sourcing and distributionfocused.

Commodity based goodsmovement.

Bottom UpMethod (used in

Chemical andOil Storage)

Research based approach. Consumption based

destination/hub concepts.Top DownApproach


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Search for land sites with help from Brokers.

Search basis : Land Size, Frontage, Topography, Commercials.

Evaluation and shortlisting on basis of Mapping

Priortisation among the deals available is done.


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Used by companies manufacturing Consumer Goods.Macro Research and Profiling of each city on logistics demand drivers

is done.

Volume of socio economic development, format and land size is

investigated.


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DemandSupply

Equation

CompetitiveAnalysis.

TenantDemand

Estimates

IndustryDensity

RetailClusters

FSI

Land Usepatterns

ZoningLogistics

Infrastructure

Growth


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Proximity to

existingWarehouses

Connectivity

to LogisticsInfrastructure

Cargo

TransferPoints

IndustrialAreas

Retail Areas Octroi CheckPoints


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Plot Size andShape

Space for heavyvehicle

movementModular Design

& Flexibility

Color Schemes,

Lighting andventilation

Automation &Labor tradeoff

Should minimizecosts

Ensure higher

FSI

Product Type

and Variety

Suitableconditions

correspondingto product.

Overall Smooth and trouble free movement of vehiclesand materials


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WarehouseManagement

Process

SKUs data

Packing DataVolume

throughput

ClientSupply chainknowledge

transfer.

High OrderFulfillment Rate

Low IncorrectFulfillment

NegligibleInventory

Damage

Low Turnaround

time &Discrepencies


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Receive PUTA WAY STORE PICK Dispatch

VALUE ADDons : -

1. Repackaging.

2. Knitting.

3. Cross Docking.

4. Warehouse receipts.

5. Quality and Dispatch checks.6. Repair & Damage control.

All these are feasible because reverse logistics are almost 7 times costlier, so companies

try to avoid such procedures and take the necessary steps before the actual delivery

of the product they are supplying.


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Abbreviation Full Form Other Details

3PLs Third Party Logistics

FTWZ Free Trade Warehousing

Zone

FSI Floor Space Index Ratio between the built up area allowed and

plot area available. Higher the FSI better the

space utilisation.

2- Bin system

Smart Bin System

Kitting Process in whichindividually separate but

related items are grouped,

packaged, and supplied

together as one unit.

E.g. In ordering a PC online, a customer may select

memory, drives, peripherals, and S/W from several

alternatives. The supplier then creates a customized

kit that is assembled and shipped as one unit.

Cross Docking Cross-docking is a practicein logistics of unloading

materials from an incoming

semi trailer truck or railroad

car and loading these

materials directly into

outbound trucks, trailers, orrail cars with little or no

This may be done to change type of conveyance, to

sort material intended for different destinations, or

to combine material from different origins into

transport vehicles (or containers) with the same, or

similar destination.


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Key Companies in Logistic related businesses : -

1. DIESL(Warehousing) A TATA group enterprise ;www.diesl.in

2. SSI SCHAEFER (Material handling Equipmentsupplier)www.ssi-schaefer-asia.com

3.

Documents

Logistics Industry Ground Realities