FEaTuRE Logistics
engine from New Delhi to Kolkata; it was services (transportation, warehousing and
cheaper to transport it via Singapore. value-added services such as packaging, cold
Gopinath’s experience largely sums up the chain and customs clearance).
state of the logistics industry in India: inef- A lack of adequate infrastructure plus
ficient and expensive. Industry players and complex taxation and regulations are big
analysts say logistics costs in India are among hurdles. For example, most domestic airports
the world’s highest - accounting for 13% don’t have adequate cargo terminal facilities.
of GDP, according to a report by KPMG. Blue Dart, the leading express logistics player
That is far greater than in the United States in India, set up in 1983 and now owned by
(estimated at 9%), Europe (10%) and Japan the global player DHL, started cargo airline
(11%). Outside of the metros and a few cit- operations in 1996. In most airports, Blue
ies, the timing of deliveries is uncertain. Dart operates from the same amount of
space first given to it by airport authorities.
Anil Khanna, Blue Dart Express
Big Hurdles “In this business, turnaround time is criti-
“If one does not have the right facilities in
Logistics is still a nascent and, fragmented cal,” notes Anil Khanna, managing director
terms of size and site within an airport, it is a
industry in India. It is estimated that while of Blue Dart Express. “If one does not have huge challenge.”
outsourced logistics accounts for 54% of the right facilities in terms of size and site
total logistics spending in India, organized within an airport, it is a huge challenge.” Blue
more than 40% of road freight traffic. This
players have only 10% of the pie. In road Dart is the only logistics player in India with
naturally leads to traffic jams. Regulatory re-
transportation, which accounts for the big- dedicated cargo aircraft (just seven). Other
quirements and cumbersome documentation
gest portion (36%) of logistics spending, logistics companies typically turn to the belly
also compromise speed. “On average, a com-
74% of operators are small-time players space in passenger airlines, something even
mercial vehicle in India runs at a speed of 20
owning a single vehicle. In outsourced ware- Blue Dart does occasionally, depending on
miles per hour. In Western Europe and the
housing, 92% of players are from the unor- the load.
USA, the average speed is over 60 miles per
ganized sector. Even among the organized Moving cargo by road has its own set of
hour,” notes Vineet Kanaujia, general man-
logistics players, few have offerings across problems. National highways form only 2%
ager at Safexpress, which has a fleet of 3,500
multiple modes (air, water, rail and road) and of India’s road network, but they handle
vehicles.
Moreover, India’s tax system is complex.
To avoid multiple taxation, companies typi-
cally have warehousing operations in every
state. The result is a large number of small
warehouses around the country which lack
the latest warehousing processes and tech-
nologies and don’t offer economies of scale.
Betting on Hub-and-spoke
Despite the limitations, industry players
see strong potential. Several initiatives and
projects are under way to boost development
of roads (including the Golden Quadrilat-
eral, North-South and East-West Corridors),
ports (Pipavav, Mundra and Dhamra), and
airports (Bangalore, Hyderabad, New Delhi
and Mumbai). The complex central sales tax
is expected to be phased out in coming years.
The emergence of India as a manufacturing
hub, growth of the organized retail industry,
increased domestic consumption, and multi-
nationals bringing in global best practices are
all expected to boost the logistics industry.
G.R. Gopinath, Deccan 360
Gopinath, for one, is betting big. He is cre-
“Starting a logistics business was both instinctive as well as fueled by my own frustrations.”
ating India’s first hub-and-spoke distribution
model for express logistics. A 100 acre state-
www.supplychains.com MARCH/APRIL 2010 47
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