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Logistics





Logistics : Evolving Landscape in India

  • Indian logistic market from the manufacturing sector alone is estimated to be around US$ 14.3 bn in 2004 and is expected to increase to  US$ 19.54 bn by 2009  with a CAGR of nearly 6.4%. The contribution of logistics industry to country’s GDP has increased from 7.4% in 1999-00 to 9.3% in 2004-05.
  • India spends around 13% of its GDP on logistics, compared to a global average of 10-11 %. Globally  better supply chain management has reduced logistics costs by nearly 1% over last 10 years. However Supply Chain Management still remains a very new concept for Indian industries which are increasingly looking to gain competitive edge by adopting logistics and Supply Chain Management concepts and practice.
  • Key trend in the industry is towards outsourcing logistics requirements to Third Party Logistics (3PL) players. The demand is specially driven by the entry of MNCs and increasing export focus of Indian companies .The estimated market for 3PL players in 2003 was US$ 250 mn and is likely to grow at a CAGR of more than 20% during next five years.
  • Consistent good performance of the economy (over 8% growth rate), is the key force, driving the growth in the logistics sector. Vibrant economic scenario of the country has ignited the activities in manufacturing/infrastructure sector.


Indian companies can save substantial cost by adopting modern supply chain and logistics solutions.

Estimated Cost Saving by Reducing Logistics Cost by 1%

Functions
At 13% of GDP
(US$ bn)
At 12% of GDP (US$ bn
Amount Saved (US$ bn
Transportation
32.45
29.95
2.50
Inventory
23.18
21.40
1.78
Packaging
10.20
9.41
0.78
Handling and Warehousing
8.34
7.70
0.64
Others
18.54
17.12
1.43
Total Logistics Costs
92.72
85.58
7.13



Key Contributing Sectors
Automotive
Efficient supply chain ensures continuous assembly lines
Manufacturing
Just in time approach requires  efficient logistics and distribution
FMCG
Strong distribution is the key to success
Retail
High inventory turnover requires efficient distribution and transportation
Healthcare
Cold chains are imperative for distribution of vaccines and biological products
Textiles
Efficient distribution reduces costs


Channels of Logistics that result in Freight
Surface Transport

 

Roads
Railways
Air Transport
Water Transport
                                             

Components of Freight Logistics
Freight Transportation
Warehousing
Packaging
Custom Clearing and Forwarding
Inventory Management
Labeling and Order Processing


Snapshot of Logistics Operations via Major Channels

Roads

  • Road transport accounts for 85% of passenger traffic and 70% of freight traffic
  • Currently Indian roads handles over 1,176 bn tonnes Km of freight per annum
  • Total number of goods vehicle has increased from 82,000 in 1951 to 4.04m in 2005

Railways

  • 15% of passenger traffic and 30% of freight transport
  • Freight contributes over 65% of its revenue
  • In 2004-05 it handled 602 mn tonnes of freight
  • 95% of revenue comes from the bulk commodities such as Coal, iron ore, cement, fertilizers and food grain. Coal alone constitutes nearly 50% of all bulk freight

Air

  • Cargo handled at airports has gone up at a CAGR of 7.8% from 0.65 mn tonnes in 1995-96 to 1.3 mn tonnes in 2004-05
  • International cargo handled has increased at 6.8%per annum, while domestic has increased at 9.9 % per annum
  • 5 major airports have accounted for 90% of total cargo handled in the country

Water

  • Major ports handle 90% of seaborne trade
  • In 2005-06 major ports together have handled 423.41 mn tonnes of cargo traffic out of the total 604.58 mn tonnes of cargo from all ports in the country
  • Container traffic has gone up by 14.2% during 2000-2005
  • *(source: Business Standard


Infrastructural Backbone of Logistics Industry

  • Madhya Pradesh has a well developed transport infrastructure of roads, rails and airports. 5200 km of National Highway runs across the state with total length of the roads in the state estimated around 67,600 km. The state also has 5000 km of rail networks with 425 trains passing through the state daily.
  • MP has 5 operational domestic airports. The Indore airport has the capability to handle international flights. The mammoth transport infrastructure of the state provides connectivity with all the key cities and major ports.
  • Under the National Highway Development Programme of NHAI, 1254 km of the existing roads are being converted into four lane highway.


Distances of key Cities from Bhopal. Equidistant Connectivity - Key Strength

Delhi  744 km
Mumbai 779 km
Ahmedabad 568 km
Hyderabad 839 km
Bangalore 1401 km
Kolkata 911 km
Pune 802 km
Vadodara 509 km

Madhya Pradesh is striving  to create state-of-the art infrastructure essential to sustain modern supply chain and logistics industry with a vision to transform the  state into a key logistics hub of the country.


Warehousing – A Value Proposition

  • The state requires an immediate addition in capacity at strategic locations to ensure quality services to the target market.
  • The partition of the state has affected its warehousing capacity. The Government is taking several initiatives to promote investments in this area to rebuild its warehousing and logistics might.
  • The state offers a lucrative utilisation rates of 80-85%, which can be as high as 90-95% at strategic locations. 
  • The Governments also invites private developers through lucrative business value propositions.
  • The economic growth of the country is further facilitating the growth of the industry in the State.


Warehousing - Building Capacity

  • Along with the logistical hub for the Country, MP also has a substantial internal demand for warehousing.
  • Post partition, around 32% of states capacity was given to Chhattisgarh. This has created a significant shortage in warehousing capacity.
  • Government is taking several initiatives to upgrade the existing capacities and building capacities in the State.
  • Madhya Pradesh Warehousing & Logistics Corporation is the nodal agency of the GoMP with 1.2 million MT of capacity and presence in 232 locations.
  • Government also invites private players to take part in its drive to position MP as the logistical hub of the Country.
  • The Government has identified 11 locations as the hubs requiring immediate attention and have the capacity to become the major distribution centers for logistical activities and management. Further, 23 other locations require capacity building to meet requirements.


MP Offers a Strong Value Proposition

  • Central location of MP facilitates equidistance connectivity with major Indian cities. The strategic location is the key incentive for various industries to establish their logistics hub in the state.
  • MP is the connecting link between the northern & southern states and eastern & western states of the Country. All major highways and rail routes passes through the state. 
  • On completion, the North-South and East-West corridor passing through the state will provide further impetus to the logistics sector due to improved connectivity with key metro cities.
  • Companies can  save a maximum of 25% of the transportation cost by locating their warehouse in MP via locating it in North. Similarly saving of 17%, 23% and 16% can be made in MP via locating it in southern, eastern and western part of the country.  
  • Since 90% of the operational cost of a logistics company lies in transportation, substantial savings can be made by locating the company in the central region.
  • The peaceful labour environment in the state makes MP a favorable business destination.
  • Well developed infrastructure of roads and airports facilitates timely and expedite movement of goods across the country.
MP’s inherent strength coupled with  advantage of connectivity and cost makes it an ideal investment destination


MP has Advantage Across All Key Ingredients of a Logistic Hub

  • Geographic location Being centrally located, MP provides  inherent advantage as a logistic and distribution hub for companies.
  • Linkage with other cities Well connected through roads, rail and by air with other major cities
  • Convenient linkages to Kandla Port, Jawahar Nehru Port  etc.
  • Infrastructure  MP has well developed  transport infrastructure.
  • Indore airport has the potential to handle international flights, international airport is also proposed at Bhopal 
  • Skilled labour Cost of labour US$ 2.3 per day as compared to US$ 3.5- 4 per day at metros
  • Labour peace Man days lost due to strikes & lockouts is less than 0.5% of the total available man days


A Preferred Investment Destination

  • MP provides an ideal combination of location, cost and infrastructure, factors critical for the efficient operations of the logistics industry. The State offers opportunities for logistic service providers specially the 3PL players as more and more companies are outsourcing their logistics requirements to specialized companies.
  • The Container Corporation of India has three operational inland ports in the state, at Mandideep Bhopal, Pithampur Indoor and Malanpur Gwalior.
  • Companies in the FMCG, manufacturing and textiles, sectors are increasingly looking at MP for establishing their storage and distribution networks.


Government  Proactive Initiatives

  • More than 1200 kms of National Highways being 4-laned under the NHDP
  • 13 strategic stretches of State Highways covering 1871 kms being upgraded through BOT
  • MP Road Development Corporation constituted to spearhead road development in the state
  • 5500 kms of fibre-optic network laid 
  • Indore & Bhopal Airports are being upgraded as International Airports


Way Forward

  • Madhya Pradesh offers multiple opportunities in the logistics sector specially for companies engaged in manufacturing and distribution activities. 
  • A central warehousing facility would facilitate uninterrupted supply of raw materials and speedy distribution of finished goods across the country. Decrease in lead time will further result in substantial cost saving for the company. 
  • Cold chain facilities have the potential to cater to the needs of pharmaceutical, biotechnology and food processing companies. A central unit will facilitate distribution in the wider area without locking investment in creating such expensive facilities in multiple places.
  • Madhya Pradesh State Industrial Development Corporation (MPSIDC) is planning to construct a state-of-the-art Integrated Transport Terminal, which will provide one stop-shop solution for all the logistics requirements of a company. The State Government is willing to partner with private players, foreign investors and other domestic and international companies in its endeavour. 
  • The investment opportunities are ideal specially for 3rd Party Logistics and 4th  Party Logistics  services provider to make MP as the key hub for their various services component operations.


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23 Sep 2017
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