Monday, July 9, 2007

Today logistics play an important role for a company in reducing their overall cost and provide overall satisfaction to their customers in terms of delivering the product to them whether raw materials or finished goods at right place and at right time without any theft, damages, etc. Initially the companies depend upon local transporters for the movement of their materials but with the presence of logistic companies the trend is change. Today logistic company not only helps companies in the movement of materials but also provides complete logistic solutions like warehousing, distribution, inbound and outbound logistics, different mode of transportation depends upon the requirements of customers.

Currently in India for a domestic movement of materials most of the companies will go for road, rail and air mode of transportation.But today companies are interested in introducing new concept which is inland ship movement which help them in the movement of materials along the coastal line of the country and reducing their overall logistic cost.

Lot of companies concern that if they move their materials via sea then it will take more time but as far as cost is concern it will reduce upto 15 to 20 percent if the materials is move via sea and also companies will have no tension about any damages, theft and moreover any union problem when materials move from different states.

Concept about this business
Logistic Movement: North to South

In above diagram there are basically two modes of transportation that companies follow. The first one is movement of materials by road which most of the companies follow but as per new concept the other mode is to move materials via ships along the coastal line.

The movement of materials from parts of north starts and it will move to kandla port via road in which materials are moved in the containers and from Kandla port it will move to port of Cochin via ship by doing transshipment along the coastal line.
After Cochin it will move to Chennai and reach up to Calcutta along the coastal line.

Something about 3PL

Third Party Logistics (3PL), the concept of a single professional logistics service provider managing the entire logistics functions of a company, had originated in the developed economies of Europe and America, to relieve industries from huge logistics costs apart from the hassles of dealing with multiple in-coherent logistics service providers. It proved to be immensely successful in improving logistics efficiency of majority of industries and quickly gained popularity, spreading across the globe. In the process, several professional logistics service providers offering that kind of services have emerged to be leading 3PL providers with operations in multiple continents.

In the initial stages, 3PL providers offered only basic logistics services such as warehousing and transportation. But with growing logistics needs of organizations to remain competitive in globalized economies, 3PL providers have evolved to offer several other value added services ranging from packaging to supply chain planning.

Trend about 3PL in INDIA
3PL industry’s origin in India can be traced back to mid 1990s. The industry was pioneered by global logistics majors as a part of extending these services to the Indian subsidiaries of multinational companies in automobile, electronics and FMCG sectors. Indian subsidiaries of multinational companies in these sectors took cue from their parent companies and began to outsource a share of their logistics functions to these specialist service providers. Though insignificant in the first few years, Indian 3PL industry is experiencing a rapid growth after year 2000. The number of participants in this industry had grown to be more than 400 by year 2006.

The Indian 3PL industry can be divided into three distinct tiers - National Major 3PL companies with nationwide presence, Regional 3PL companies with strong presence in one or two regions, and Small Remote 3PL companies.

Factors that are driving Indian Logistics towards 3PL

Value Added Tax (VAT), the Indian Government’s proposed uniform tax regime, is expected to drive Indian industries towards using more 3PL services. Introduced partially in 2005, a full implementation of this regime is expected to necessitate having centralized large warehouses in regional hub cities, to achieve best efficiency in logistics. Since building such large warehouses requires huge investments, most Indian companies are likely to outsource the warehousing function, creating immense potential market for 3PL service providers. Leading companies in major industries have already started planning for the new scenario and the required warehousing capacity to be outsourced. Others are expected to follow them soon.

The government of India’s increased focus on improving logistics infrastructure is expected to have a huge positive impact on 3PL market. The government has invested US $17 billion to upgrade highway networks, with the implementation of two major projects, namely the Golden Quadrilateral network and the North-South-East-West (NSEW) Corridor. Apart from this, in a remarkable infrastructure related decision, the government has opened up rail freight operations to private players, thereby creating opportunities for cheaper and faster movement of goods. Transportation by rail is definitely cheaper than by road, as trains are faster and have lower costs per unit distance traveled. This is expected to enable 3PL service providers in offering more cost-effective services to clients, thereby increasing the 3PL usage by all industries.

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