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LOGISTICS INDUSTRY STRUCTURE

Accor ding to The Council of Logistics Management, US A,

Logistics Management is ³that part of supply chain

management that plans, implements, and contr ols the forwar d

and reverse f low and storage of goods, services and related

information between the point of or igin and the point of

consumption in or der to meet the customers' requirements.´

Consider ing Indian logistics industry. It has three pr incipal components:

Inf rastr ucture pr oviders

Key transportation service pr oviders

Support service pr oviders



LOGISTICS INDUSTRY STRUCTURE



INDIAN LOGISTICS INDUSTRY OVERVIEW

The Indian economy has been gr owing at a rate of over 7.5%

since the last three years. The manuf actur ing sector has

registered a gr owth rate of 9.1% in 2006-07

The major logistics functions for the Indian industr ies include

transportation, warehousing, f reight forwar ding and other

value-added operations like Management Information

Systems

Logistics costs in India are estimated to be ar ound 13% of

GDP, which is Rs4,226.21 billion

Basically, the Indian logistics industry is dominated by the

unor ganized mar ket. The major players of the industry can be

br oadly categor ized as local transporters, transporters

pr oviding some kind of value-added services such as

warehousing services, and completely integrated players

pr oviding 3PL services.



AIR TRANSPORT S YSTEM IN INDIA

The Indian aviation sector can be br oadly divided into following

four categor ies:

Domestic air lines r un scheduled f lights within India besides

servicing select inter national destinations;

Inter national air lines operate scheduled inter national air services

to and f r om India;

Non-scheduled operators includes charter operators and air taxi

operators; and

Air car go service operators, who transport car go and mail

Air transport sector¶s contr ibution¶s to the GDP remains constantover the last couple of years, the sector is emer ging and gaining

signif icance in country¶s overall economic development due to

r ise in economic activities.



AIR CARGO MARKET Indian aviation industry has been

exper iencing an exceptional gr owth rate over the last f iveyears, dr iven by booming Indian

economy, f lour ishing trade (bothexport and import)

Both domestic and inter national air car go traff ic at all Indian

air po

rts have registered an exponential gr owth rate over thelast 5±6 years. Domestic air car go traff ic has been gr owing at12.57%, whereas inter national

air car g

otra

ff ic

has been mo

ving at of 13%



OPPORTUNITIES

In view of the present boom in air car go segments in India, several

domestic as well as inter national air carr iers have decided to start air

car go operations in India and some of them have already started f lying

f reighter air craf ts in the country.

Indian the public sector air line operator, which has leased belly space

on Falcon aviation to fulf ill the demand on the Kerala-Gulf and the

India-Germany sectors, is in the pr ocess of converting two of its A310air craf t into f reighter air craf t In addition, the air line is expecting addition

of some new f leet for the quarter This is likely to enhance its car go

capacity.

Last Year, Blue Dart Aviation Ltd (BDAL) added two leased Boeing 757

f reighters to their f leet

Cathay Pacif ic Car go, the Hong Kong-based air line, decided to start six

new f reighter services in India in view of the gr owing Indo-US and Indo-

China trade



In addition, Indian Air lines is also looking at converting f ive of itsBoeing 737-200 passenger air craf ts into f reighters.

FedEx Express, the lar gest express transportation company in

the wor ld, decided to expand its networ k in India and to operate

17f lights weekly

on M

umbai-

Delhi r

oute.

Jet Airways, India¶s lar gest passenger pr ivate sector air lines,

has plans to start a domestic car go air line. The air liner has

mooted a f easibility study for this pur pose. The company would

initially convert its old passenger air craf t into f reighters to cater

to the booming domestic air car go mar ket.

Another important f eature of ecstatic gr owth of Indian aviation

industry is air craf t

maintenance, repair and overhaul (MRO) industry.



MAJOR PLAYERS

Majo

r players pr of iled in this se

ction are sele

cted

f r om air transport system of logistics services in India.

List of the major players pr of iled is given below:

Indian (Indian Air lines)

Jet Airways Blue Dart

a f ew multinational companies like AFL, DHL and Fedex are

also operating in India



INTERMEDIARIES AND SUPPORT SERVICE PROVIDERSREASONS TO OUTSOURCE LOGISTICS FUNCTIONS

The f actors that dr ive the

outsour cing of logistics

function to the 3PLpr ovider can be gr ouped

into three categor ies:

strategic, operational and

f inancial(see box).

The adoption of moder n

manuf actur ing practices

such as just-in-time and

built-to-or der together with

the r ise of global manuf actur ing networ k is

also dr iving demand for

3PL services.



3PL MARKET SIZE

Realizing the signif icant benef its like cost reductions and just-in-time

delivery gained by these companies the 3PL mar ket is blooming in

India. Along with their multinational counter parts, major domestic

companies also started outsour cing The services of 3PL pr oviders can encompass the entire supply

chain or parts of it. If a company opts for the outsour cing of the

transportation pr ocess, the 3PL pr oviders extend services such

networ k design, carr ier contracting, shipment optimization, shipment

tracking and f reight payments. Services frequently outsourced to 3PLs

Direct Transportation Services

Freight Payment Services

Freight Forwar ding Warehouse Management

Distr ibution Facilities

Shipment Consolidation



CLEARING & FORWARDING AGENTS

To help companies in fulf illing legal formalities of transportation aseparate class of clear ing agents or f reight forwar ders have emer ged

over the years. The car go clear ing agents or f reight forwar ders also acts

as a consolidator of shipments.

The f reight forwar ders off er a range of logistics services to the shipper.

The Indian companies involved in f reight forwar ding business includePatel Roadways, Balmer Lawr ie, Blue Dart, Saf e Express, DHL, and Gati

Limited.

WAREHOUSING The warehousing dischar ges an important r ole in business. It creates

time utility by br idging the time gap between pr oduction and the

consumption of goods

Warehousing ref ers to the systematic stor ing of goods with the goal of

making them available on demand. In other wor ds, warehousing ref ers to

the stor ing of goods f r om the time of their pur chase or pr oduction to their

actual use or sale.



TECHNOLOGY AND INNOVATION There has been a rapid impr ovement in technological

development in the country, which has benef ited the Air

Transport System in India to a great extent. Some technological

developments in Indian aviation sector are given below: Air Traff ic Management ( ATM)

Communication/Navigation/Surveillance

Air port Author ity of India has decided for planning, pr ocur ing and commissioning of

all Communication, Navigation and Surveillance (CNS) f acilities and supportsystems for air navigation based on short-term and long-term requirements to

synchr onize the or ganization's plan with Inter national Civil Aviation Or ganization's

Electr onic Data Inter change

Is a standar d format for exchanging business data. It is he inter

or ganizational exchange of business documentation in str uctured,machine pr ocess able form over computer communication networ ks

Advance Passenger Information System ( APIS)



GROWTH DRIVERS

Economic gr owth Global trade

Cor porate Trend

Impr o

ved inf rastr

uctu

re Emer gence of global manuf actur ing networ ks and

increased FDI

Information technology

Liberalization and Deregulation



ISSUES AND CHALLENGES

Major Indian Air ports Running Out of Capacity

High Waiting Time and Congestion in Air ports

High Fuel Cost

Taxation

Aviation Secur ity

Lack of Human Power



GOVERNMENT INITIATIVES, SCHEMES &

REGULATIONS

The Gover nment of India, in a histor ic development, had enacted Air Transportation Act 1953 in or der to boost the India¶s aviation sector

and hence overall economy by allowing the pr ivate players to enter in the domestic mar ket besides the state-owned air line servicepr oviders

Emphasized the signif icance of air port inf rastr ucture in or der to meeting the gr owing demand for better air transportation f acilities

and also

to

co

mplement the increasing e

cono

mic

activity

India has also tr ied to attract Foreign Direct Investment (FDI) in theinf rastr ucture sector especially in r oads, seaports and air ports. Thecountry has reached a situation wherein 100% FDI is now allowed in most of the inf rastr ucture sectors. Signif icantly, in the aviation sector,100% FDI is permissible for existing air ports

Open Sky Policy of the Gover nment and rapid air traff ic gr owth haveresulted in the entry of several new pr ivately-owned air lines and increased f requency/f lights for inter national air lines. There is 100%tax exemption for air port pr o jects for a per iod of ten years.



AN UN WEIGHTED COMPETITIVE STRENGTH ASSESSMENT

KSF/Strength Measure Indian Jet Airways

(Rival -1)

Blue Dart

(Rival-2)

FedEx

(Rival-3)

Quality/product performance 6 5 7 9

Reputation/image 4 6 5 8

Manufacturing capability

Technological skills 3 5 7 9

Dealer network/distribution 5 4 2 6

New product innovation

Financial resources 1 2 4 6

Relative cost position 6 7 5 3

Customer service capability 4 4 6 9

Overall strength rating 29 33 36 50

Rating Scale: 1 = Very weak; 10 = Very strong



A WEIGHTED COMPETITIVE STRENGTH ASSESSMENT

KSF/Strength Measure Weight Indian Jet Airways

(Rival -1)

Blue Dart

(Rival-2)

FedEx

(Rival-3)

Quality/product performance 0.10 6/0.60 5/0.50 7/0.70 9/0.90

Reputation/image 0.10 4/0.40 6/0.60 5/0.50 8/0.80

Manufacturing capability 0 0 0 0 0

Technological skills 0.05 3/0.15 5/0.25 7/0.35 9/0.45

Dealer network/distribution 0.20 5/1.00 4/0.80 2/0.40 6/1.20

New product innovation 0 0 0 0 0

Financial resources 0.15 1/0.15 2/0.30 4/0.60 6/0.90

Relative cost position 0.15 6/0.90 7/1.05 5/0.75 3/0.45

Customer service capability 0.25 4/1.00 4/1.00 6/1.50 9/2.25

Overall strength rating 1 4.20 4.50 4.10 6.95

Rating Scale: 1 = Very weak; 10 = Very strong



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