Indian logistics industry

Overview Of The Indian logistics Industry A fast-growing logistics industry in a fast-growing economy For the tenth largest economy of the world (by GDP), its logistics industry is a checkered phenomena. Saddled with and despite several obstacles, it is evolving to keep pace with demand. Here is a look at its composition, drivers, global standing and future growth path. Characteristics INDIAN LOGISTICS MARKET ROAD AIR CONTAINER SEA LOGISTICS THIRD PARTY LOGISTICS LOGISTICS LOGISTICS LOGISTICS (3PL) INDIAN CONTAINER MULTIMODAL CONTAINER DEPOT (ICD) AND CONTAINER FREIGHT TRANSPORT HAULAGE OPERATOR STATION (CFS) (MTO) SIZE OF THE INDUSTRY Currently around $225bn and is expected to reach around $350bn by 2015 VALUE $170bn in 2010 (Strong growth @ 15-20% CAGR) GROWTH RATE 7 % to 8 % growth per annum COMMODITIES Primary: Chemicals, metals, FMCG, cement, paper manufacturing and textiles Growing: Aviation, metal & mining and consumer durables SHARE OF LOGISTICS COST FOR VARIOUS COMMODITIES (IN TOTAL SALE) Cement 15% Steel 6% 5% Auto 3% Durables 4% Apparel 3% FMCG 4% ANNUAL BREAK-UP OF FREIGHT HANDLED (mn tonnes) Fy 06 Fy 07 Fy 08 Fy 09 Fy 10 Fy 11 RAIL FREIGHT 667 728 794 850 910 1025 ROAD 1.353 1.478 1.612 1.726 1.875 1.046 FREIGHT SEA 424 464 519 530 561 570 FREIGHT AIR 1.4 1.55 1.71 1.7 1.9 2.1 FREIGHT (Shows a distinct growth in all segments) Performance GLOBAL LOGISTICS PERFORMANCE RANK FOR 2012 (Ranked among 155 countries) India ranks 46th+ with a LPI (Logistics Performance Index) of 3.08 and a performance percentage of 66.4 TOP TEN PERFORMERS OF 2012 Economy Rank LPI Score % of Highest Performer SINGAPORE 1 4.13 100.0 HONG KONG SAR, CHINA 4.12 99.9 FINLAND 4.05 97.6 GERMANY 4.03 97.0 NETHERLANDS 4.02 96.7 DENMARK 4.02 96.6 BELGIUM 3.98 95.3 JAPAN 8 3.93 93.8 UNITED STATES 3.93 93.7 UNITED KINGDOM 10 3.90 92.7 *India ranked 47th in 2010 and 39th in 2007. In 2010, the Indian logistics segment witnessed a growth of about 9.2 % over the previous year accounting revenues of about $ 82.10 billion. INDIAN INFRASTRUCTURE RATING Ranked 54th among 59 countries RAIL ROAD 25/59 "00 56/59 AIR PORT SEA PORT 40/59 51/59 COST OF COMPONENTS CONTRIBUTING OVERALL COST OF TO THE OVERALL COST OF LOGISTICS LOGISTICS PER GDP Transportation - 35% (of total costs) INDIA - 13% Inventories - 25% EUROPE - 10% Losses - 14% US - 8.7% Packaging - 11% CHINA - 17% Handling - 11% JAPAN - 11.7% Warehousing - 9% Customers' shopping - 6% COMPARISON OF COST OF LOGISTICS BETWEEN DIFFERENT COUNTRIES THE FREIGHT COSTS FOR RAIL AND ROAD 5.5 Cents/km FRANCE JAPAN I 3.7 Cents/km 2.0 Cents/km CANADA INDIA I 7.0 Cents/km COMPARISON OF MAJOR FACTORS ACROSS THE FOUR LOGISTICAL VERTICALS: INDIA VS GLOBAL ROAD TRANSPORTATION Particulars INDIA GLOBAL Avg. Truck Speed (in kmph) 30 - 40 60 - 80 Four Lane Road Length (in kms) 7,000 34.000 National Highway Length (in kms) 66.590 1,900,000 Avg. distance travelled by a truck per day (in kms) 200 400 AIR TRANSPORTATION Particulars INDIA GLOBAL Airport waiting Time - Exports (in hrs) 50 12 Airport waiting Time - Imports (in hrs) 182 24 ATF as a % of Op. Cost 35 - 40% 20 - 25% PORT & SEA TRANSPORTATION Particulars INDIA GLOBAL Turnaround time at ports (in hrs) 84 Annual container handling capacity 8.4 mm TEUS 60 mm TEUS Container handled per ship, per hr (Max.) 15 25 - 30 RAIL TRANSPORTATION Particulars INDIA GLOBAL Avg Speed 23.3 100 Capacity (TEUS) 90 150 Axle load of wagons (tonnes) 22 30 Load capacity per wagon (tonnes) 88 120 Tare weight of wagon 2 - 2.6 4.5 - 5.5 REASONS FOR THE AVERAGE PERFORMANCE. WHICH RESULTS IN. • Inadequate investments in infrastructural expansion · Relatively higher level of inefficiencies in the system • Insufficient policy-making initiative • Lesser pay and progression incentives • compared to other industries • Lesser skill development • Lower average trucking speeds • Higher turnaround time at ports · High cost of administrative delays Road Ahead PROJECTIONS CONSISTENT ANNUAL GROWTH OF AROUND 8-9 PER CENT REACHING ABOUT $190-200 BILLION BY 2020 REASONS FOR THE PROJECTED GROWTH Rapid growth in industries such as automobile, pharmaceuticals, FMCG and retail Spurt in the manufacturing sector Entry of foreign players Increase in foreign trade Govt initiatives to better infrastructure (Privatizing ports and airports, investing in no of gateway ports, highway projects, rail network, EDI systems, streamlining customs and excise) Changing tax system Mindset changing from local to global with exposure Imports and exports growing at the rate of 20 – 25 % annually On a per-annum basis, United States invests 5 percent of its annual logistics spend on infrastructure, India is investing 23 percent or over four times as much. MISCELLANIOUS FACTS India's organized logistics market is 6% of the total market. TOATAL MARKET 100% FDI 100% FDI is allowed in logistics. Generates employment for 45 million people The contribution of the 3 PL segment is likely to grow from 2% in 2009 to 4% by 2014 Sources http://india.smetoolkit.org/india/en/file/content/43677/en/Indian_Logistics_Industry_Snippet.pdf http://www.dessenceconsulting.com/pdf/Study%20of%2OLogistics%20in%20lndia.pdf http://www.internationaltransportforum.org/jtrc/DiscussionPapers/DP201204.pdf http://www.pianc.org/downloads/oncourse/bulletin126b.pdf http://www.dinodiacapital.com/pdfs/lndian_Logistics_Industry_Dinodia_Capital_Advisors.pdf http://www.indiawarehousingshow.com/2012/Sunil%20Wahi.pdf http://www.iseindia.com/ResearchPDF/Logistics_Updatel.pdf http://www.indiabiznews.com/?q=node/2283 http://siteresources.worldbank.org/TRADE/Resources/239070-1336654966193/LPL_2012 final.pdf F&B