Sanchaalan
CASE STUDY
Indian Logistics Overview
Logistics is the backbone of the economy. It affects all industries in three sectors – agriculture,
manufacturing, and services. In India, the logistics sector has been marred with inefficiencies,
depriving the industry of achieving its full potential. The logistics sector makes up 14.4% of
the country's Gross Domestic Product (GDP), but it costs 14% of the GDP. The global average
logistics cost to a country is approximately 8%. India's logistics sector would expand at a
compound annual growth rate of more than 10 percent, from $200 billion in early 2020 to at
least $320 billion in 2025.
3PL
According to various reports, the Indian third-party logistics (3PL) market is slated to witness
high growth in the coming years. According to a report by the UK-based market research firm
Technavio, the 3PL market in India is poised to grow by US$10.74 billion in the period 20212025, progressing at a compound annual growth rate (CAGR) of almost 8% and witnessing an
incremental growth of US$81.73 million by 2024. In India, the 3PL market is likely to be driven
by growth in sectors like fast-moving consumer goods (FMCG), manufacturing, retail, and ecommerce, which demand specialized logistics support and complex solutions for better
management of their supply chain processes. The Indian logistics market is fast evolving,
keeping in line with the technological and infrastructural developments as well as various
policy reforms taken by the government, including the introduction of e-way bills, fast-tag, einvoicing, GPS-based toll collection, etc. However, most 3PL firms are running without
adopting these latest technologies.
All companies are increasingly positioning themselves as 3PL providers with strong
warehousing capabilities. The largest FTL companies in India are increasingly engaging in
discussions with technology companies, start-ups, solution providers, etc., to improve their
efficiency as their key near-term objective is to increase their profitability. Logistics lifecycle
management is indeed a focus for companies which have a large owned fleet. Today, many
logistics companies are trying to uncover authentic cause-and-effect relationships due to
fragmented solutions resulting in varied data from their vehicles, operational hubs, and IT
systems.
Significant issues in the sector:
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In India, the logistics sector has been marred with inefficiencies, depriving the industry
of achieving its full potential
Domination of unorganized sectors in logistics markets
Heavy reliance on road transportation & fluctuating fuel costs
Identify appropriate greenfield & brownfield locations
Minimal use of rail cargo containerization
The key steps for consideration are making tactical choices among Less Than Truck
Loads (LTL), Full Truck Loads (FTL), and Milk Runs for delivering goods and using
efficient multimodal transportation
High indirect costs like
a)
Inventory carrying costs
b)
Theft and damages due to poor planning and improper management of stock
Market Dynamics
Market dynamics are forces that impact the prices and behaviors of India's 3PL Market
stakeholders. These forces create pricing signals which result from the changes in the supply
and demand curves for a given product or service. Forces of Market Dynamics may be related
to macro-economic and micro-economic factors. There are dynamic market forces other than
price, demand, and supply. Human emotions can also drive decisions, influence the market,
and create price signals.
As the market dynamics impact the supply and demand curves, decision-makers aim to
determine the best way to use various financial tools to stem various strategies for speeding
the growth and reducing the risks
Problem Statement
You are working in a start-up ABC Logistics Solution, that provides 3PL services to major firms.
The firm is at a very initial stage and just got its 1st contract (for 5 years, which can be
extended up to 10 years depending on the performance of the first 5 years) from an FMCG
conglomerate based in Delhi. This company has only 1 manufacturing plant in Faridabad, and
its majority of distributors are located in the northern & eastern parts of the country. The
company offers around 1000 SKUs of different categories, each with a different expiration
date. Last year, the company sold approximately 35 lakhs units in the central & northern
regions and 18 lakh units in the eastern part of the country.
You are assigned as 'Operations Head' of ABC Logistics Solution, and now you have to design
a complete operation strategy to complete the contract successfully
Feel free to make realistic assumptions!
Your strategy might include:
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Identifying greenfield & brownfield locations
Warehouse management strategies
Logistics planning
Operation during peak & off seasons
Additional Services Offered
KPIs to evaluate your start-up's performance