45694501 logistics-project

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Global issues in logistics management
PROJECT REPORT
Submitted in partial fulfillment of Post-Graduate Degree
MASTER OF BUSINESS ADMINISTRATION
2010
NAME : TAMILARASAN.A
ENROLMENT NO : SAA04M147ELB1HA3
Under the supervision of
Dr. Nirmal Kumar. R. T M.Com.,M.B.A.,AMIBM.,Ph.D.,
SOUTH ASIA UNIVERSITY
UNITED KINGDOM

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BONAFIDE CERTIFICATE
CERTIFICATE
This is to certify that project entitled “GLOBAL ISSUES IN LOGISTICS
MANAGEMENT “ is submitted by TAMILARASAN.A (ENROLMENT NUMBER -
SAA04M147ELB1HA3), GEMS B SCHOOL, PONDICHERRY in partial fulfillment of the first
trimester requirement in Logistics Management for the award of the degree Master of Business
Administration and is Certified to be an original and bonafide work.
Date : Supervisor

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CONTENT
CHAPTER TITLE PAGE NO
ACKNOWLEDGEMENT 6
EXECUTIVE SUMMARY 7
1 INTRODUCTION
2 FUNCTIONS OF LOGISTICS
3 THREE CATEGORIES OF LOGISTICS
4 VALUE-ADDED ROLE OF LOGISTICS
5 IMPORTANCE OF LOGISTIC MANAGEMENT
6 LOGISTIC PLANNING
7 WHAT IS LIS & ITS OBJECTIVES
8 LOGISTICS IN BUSINESS
9 ADVANTAGE OF LOGISTICS
10 CONCLUSION

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ACKNOWLEDGEMENT
I am indebted to all powerful almighty God for all the blessings he showered on me and for being with
me throughout the study.
I also express with great pleasure and sincerity to record my thanks, gratitude and honour to
Mr. L. Alphonse Liguori-Managing Director, Mr. M. Tamijuddin-Director academics.
I place on record my sincere gratitude and appreciation to my project guide
Dr. NIRMALKUMAR.R.T for his kind co-operation and guidance which enable me to
complete this project.
I take this opportunity to dedicate my project to our loving faculty
Dr. NIRMALKUMAR.R.T who was a constant source of motivation and I express my
deep gratitude for his never ending support and encouragement during this project.
Finally I thank each and every one who helped me to complete this project.
DATE : TAMILARASAN.A

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CHAPTER - 1
INTRODUCTION
INTRODUCTION

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Logistics:
“The service of providing the right resources at the right time and right place for efficient and effective
performance of a goal-oriented activity, including consumption is called as logistics.”
In simple words, “Logistics is the process of anticipating customer needs and wants; acquiring the
capital, materials, people, technologies, and information necessary to meet those needs and wants; optimizing
the goods- or service-producing network to fulfill customer requests; and utilizing the network to fulfill
customer requests in timely way.”
Logistics is the support element of the enterprise. It helps in managing the movement and storage of:
 Material into the enterprise.
 Goods in the enterprise.
 Finished goods from the enterprise.
Its focus should be upon its inbound logistics system (movement of material within the organization)
and its outbound logistics system (meeting the requirements of its customers). The definition above accurately
defines the logistics process but is too restrictive under the modern concept of logistics. Logistics, as a support
element of the enterprise, incorporates activities beyond those identified in the preceding definition. Consider
an example, the enterprise that introduces a new product or a significant change in the existing product. Support
of the new product or feature may require training, the development of technical publications and the
acquisition of spare parts and special tools or repair (test) equipment. These items also belong under the
umbrella of logistics; thus our definition must be revised to include them.
This is the simplified definition of logistics, which states logistics objective clearly:
“Getting the right item to the right customer, in the right quantity, in the right condition, at the right
place, at the right time and at the right cost.”
The right item in the right quantity here prefers to the raw material, finished goods, trained personnel,
spare parts or service created, required or procured by a firm based on ordered or forecasted customer (whether
internal or external) requirements. This indicates the following role for logistics:
(1) Accurate interpretation of customer requirements or orders or marketing strategy, as also
providing manufacturing operations support.
The right customer at the right time and the right place refers to the requirement of:
(2) Precise execution of the process of reaching the product from the point of origin to the point of
requirement/consumption.

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The right condition concerns:
(3) Suitable care of the product from the point of origin to the point of requirement consumption in
order to avoid damage and/or deterioration.
At the right cost indicates:
(4) Efficiency to ensure the lowest cost during execution.
Hence, logistics is the process of accurately interpreting customer requirements or orders or marketing
strategy, as also providing manufacturing operations support, with precise execution of the process of reaching
the product material from the point of origin to the point of requirement consumption ensuring suitable care of
the product material throughout to avoid damage deterioration, continuously ensuring the lowest possible cost
throughout the process.
Logistics is concerned with getting products and services where they are needed when they are desired.
The responsibility of logistics is the temporal and spatial positioning of raw materials, work in progress, and
finished inventories when and where required. Hence, one of the basic functions of logistics is the
provision of availability.

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CHAPTER - 2
FUNCTIONS OF LOGISTICS
FUNCTIONS OF LOGISTICS
Facility of location & Network design:

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Facility of location & network design refers to the design of the geographical structure of logistics
facilities from where logistics operations are carried out. The number, size, location of logistics facilities like
manufacturing plants, warehouse, cross dock operation, wholesaler & retail outlets affects to the aspects of
other logistical function. This activity is necessary location & network structure.
Information management:
It involves ensuring fast & accurate information for efficient & effective performance of logistical
activities. Information also threads together all the activities in to an integrated process. Information gives a
link of many activities such as order processing, Inventory management, forecasting, production scheduling.
Many firms developed growing interest in logistics because of 1) Advancement in information technology 2)
Growing recognition of system approach3) Higher emphases on customer service4) Total cost concept & etc
Transportation management:
Transportation enables the means of transfer of inventory given the location & network framework
developed earlier. This involves the selecting the modes of transportation like Air, Water, Rail, Road & the
decisions relating to outsourcing this activities to other agencies.
Selection of the modes of transportation depends on the following factors: A) Speed & reliability B) loss&
damage C) Inventories D) Freight rate E) Market competitiveness F) Company policy & customer influence G)
External market influences. The aspects of transportation management is an essential factor 1) Facility
Location 2) Transportation cost3) consistency.
Inventory management:
Inventory management concerns with the decision regarding the amount of type & material stored at
various facility location. These decisions will be affected by the decision made under the function of facility
location & transportation e.g.: the location of warehouse & retail outlets.& modes of transport whether fast or
slow will affect the quantity type of material to be stored at facilities location.
Warehousing management:
Warehousing provide the adequate space for the inventory at the right location, unpack aging, sorting,
& consolidation of material & modification of material elements if required .the role of warehouse provide the
economic & service benefit to the logistical system. Economic benefits: - movement consolidation, break bulk,
cross-dock, processing /postpone movement & stock piling. Service benefits are spot stocking, assortments,
mixing & production supports.
Material Handling system:
Material handling activities are required while unloading, moving & loading material at facilities.
These include the variety of mechanical equipment like Conveyors, Forklift, Truck, and Crane. One of the
considerations of effective material handling is the minimization of product damage during handling.

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Packaging:
It helps in achieving the objective of maintaining the material in the right condition through the logistics
process. Packaging decision is impacted by requirement of other activities like protection & facilitation during
transportation, material handing & storage as so ultimately customer requirements

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CHAPTER – 3
CATEGORIES OF LOGISTICS

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CATEGORIES OF LOGISTICS
Integrated logistics support, when properly understood and applied, can provide the means to
identify and resolve many logistic problems, frequently before they developed. Logistics, in the broadest sense
of the word, can be considered as scope of activity comprised of three major areas or subsets.
(1) Subsistence logistics,
(2) Operation logistics, and
(3) System logistics.
Subsistence logistics is concerned with the basic necessities of food, clothing, and shelter .At any given time,
within any given environment, subsistence logistics is relatively stable and predictable. Men and women, as
rational begings, know within very narrow limits what is needed, how much is needed, where it is needed, and
when it is needed. Subsistence logistics is primary activity of primitive societies and is an essential ingredient
of an industrial society. It provides foundation of operations logistics.
Operation logistics extends beyond the bare necessities by incorporating systems that produce the luxuries or
niceties of life. By definition, operations logistics incorporates the raw material required by the enterprise in the
production. This category of logistics is also relatively constant and predictable. All enterprise, from the
automobile manufacturer to the fast food chain store can determine the quality of materials and the resources
needed for its production with high degree of accuracy. Operation logistic can not, however, determine when a
component of the enterprise is going to break down ,what will be required to repair it ,or the duration activity
.Operation logistics, which is concerned with the movement an storage of material in to ,through ,and out of
enterprise ,provide the foundation for system logistics .
System logistics incorporates the resources required in keeping a system in operating condition. These
resources, or logistics elements, are spares and repair part, personnel and training, technical publication, test
and support equipment, and facilities. A well designed integration of these logistics elements is critical when,
for eg; repair instructions describe one methods of repair and tools are developed for another method . Thus
repair may be impossible

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CHAPTER – 4
VALUE-ADDED ROLE OF LOGISTICS

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VALUE-ADDED ROLE OF LOGISTICS
Four principal types of economic utility add value to a product or service. Included are form, time,
place, and possession. Generally, we credit manufacturing activities with providing form utility, logistics
activities with time and place utility, and marketing activities with possession utility. We discuss each briefly.
 Form Utility: Form utility refers to the value added to goods through a manufacturing,
production, or assembly process. For example, form utility results when raw materials are combined in some
predetermined manner to make a finished product. This is the case, for example, when a bottling firm adds
together syrup, water, and carbonation to make a soft drink. This simple process of adding the raw materials
together to produce the soft drink presents a change in production form that adds value to the product.
 Place Utility: Logistics provides place utility by moving goods from production surplus points to
points where demand exists. Logistics extends the physical boundaries of the market area, thus adding
economic value to the goods. This addition to the economic value of goods or services is known as place utility.
Logistics creates place utility primarily through transportation. For example, moving farm produce by rail or
truck from farm areas to markets where consumers need this produce creates place utility. The same is also true
when steel is moved to a plant where the steel is used to make another product. The market boundary extension
added by place utility increases competition, which usually leads to lower prices and increased product
availability.
 Time Utility: Not only must goods and services be available where consumers need them, but
they must also be at that point when customers demand them. This is called time utility, or the economic value
added to a good or service by having it at a demand point at a specific time. Logistics creates time utility
through proper inventory maintenance and the strategic location of goods and services. For example, logistics
creates time utility by having heavily advertised products.
To some extent, transportation may create time utility by moving something more quickly to a point
of demand. Time utility is much more important today because of the emphasis upon reducing lead time and
minimizing inventory levels through logistics-related strategies such as JIT inventory control.
 Possession Utility. Possession utility is primarily created through the basic marketing activities
related to the promotion of products or services. We may define promotion as the effort, through direct and
indirect contact with the customer, to increase the desire to possess a good or to benefit from a service. The role
of logistics in the economy depends upon the existence of possession utility, for time or place utility make
sense only if demand for the product or service exists. It is also true that marketing depends upon logistics.

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CHAPTER – 4
IMPORTANCE OF LOGISTICS MANAGEMENT

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IMPORTANCE OF LOGISTICS MANAGEMENT
Logistics management from this total system is the means whereby the needs of customers are
satisfied through the coordination of the materials and information flows that extend from the marketplace
through the firm and its operations and beyond that to supplies.
Today’s organizations worldwide need logistics management more than ever because of following:
1) Competitive pressure 2) information technology 3) channel power and 4) profit leverage.
These are the discussed briefly in the following paragraphs.
1) Competitive pressure: during the 1970s. Logistics received more attention as a major cost driver to
offset the effects of rising interest rates and increasing energy costs. In addition the logistics cost became
more critical for many multinational companies because of globalization of their business. these
developments affected logistics primarily in two ways :
I. The growth of world class competitors which has pressurized organization to differentiate themselves
and their product offerings. Logistics enable domestic firms to provide more reliable and responsive
services to customers in the local markets than overseas competitors.
II. As firms increasingly buy and sell off-shore, the supply chain between the manufacturing firm and its
supplier and customer firms become longer, costlier and more complex. Hence in such situation,
excellent logistics is necessary to take advantage of global opportunities.
2) IINFORMATION TECHNOLOGY: with the explosion of information technology, organization
gained the ability to better monitor transaction intensive activities such as ordering, transportation and
storage of goods and materials. Computerized quantitative models along with technology increased the
ability to manage material flows and optimize inventory levels and movements. For example, systems
such as material requirement planning (MRP 1), distribution resources planning (DRP) and just-in-time
(JIT) allowed firms to link many activities such as order processing, inventory management, forecasting
and production scheduling.
3) CHANNEL POWER: the channel power shifted from manufacturers to wholesalers,
distributors and retailers. This has had a great impact on logistics. In major consumer good industries,
when competition increases, many suppliers and manufacturers are forced out of competition and a few
leading; competitors remain in the market. Those who remain are highly competitive and are able to

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offer very high quality products. In the views of consumers, all of the leading brands are substitute for
each other and lower brand loyalty decreases the manufacturer’s power. Ultimately sales of consumer
products are determined by what is in stock, and not by what particular brand offered to the customers.
4) PROFIT LEVERAGE: Any amount of money saved in logistics costs has greater impact on the
organizations profitability than a similar increase in sales revenue considerably because profit earned
through sales is only a small percent of sales revenue. Hence, a rupee saved in logistics is a rupee
increase in the company’s profit. Therefore, we can infer that logistics cost savings have much more
leverage than an increase in sales.

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CHAPTER – 5
LOGISTIC PLANNING

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LOGISTIC PLANNING
A corporate mission is a statement setting out long range goals unique to each organization
elucidating the business the company wants to be in, who its customers are its basic beliefs about business,
and its goals of survival growth and profitability. Objectives and goals sets the targets which are to be
achieved in the long term in order to fulfill the mission of the firms in order to achieve the long term
objectives and goals, alternatives strategies or actions plans need to be evaluated in the context of the
environment faced by the firm from these alternatives, specific strategies must be selected for
implementation in order to meet the objectives and goals that will fulfill the mission of the firm hence
business strategy is a long range game plan of an organization and provides a road map of how to achieve the
corporate mission. The strategic or long term plans for the firm and developed at the highest level of
management of the firm.
The strategic planning for each of the functions of the firm, such as marketing, operations, logistics, etc.that
are derived from the firms strategic plans, are developed at the highest level of the concerned function. The
strategic plan within the function need to be detailed in the form of tactical and operational plans at the
tactical and operational levels of management in the respective function. The operational level og
management of a function in affirm plans the operational activities in order to meet the tactical and strategic
plans of the function and control the activities during implementation on order to meet the operational plans.
According to the planning level illustrates the logical flow of the planning process across the organization.
The activity flows in the logistic function bring out the sequence of activities from order receipt to
procurement to customer delivery. Strategic plans determine the capacity plans by defining the internal
capacity limitations in manufacturing, warehousing, and transportation as well as human resources.
PLANNING AND OPERATIONS PROCESS
The strategic plans developed for the firm lead to the development of strategic plans for the logistics
functions. These in turn generates the tactical and operational logistical plans. For e.g. the objectives of cost
reductions for a firm would less to strategies to reduce total logistics cost reduction for a firm would lead to
strategies to reduce total strategies costs. these strategic plans could take the form of, for e.g. reducing the
number of warehouses, transportation consolidation, or purchase of new software for logistic information

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management next ,the tactical plans are developed to implement the stetegic plans .tactical plans out line the
steps or procedure that are required to execute strategic plans. for eg in order to reduce the number of
warehouses one can plan to centralize the ware housing at a few locations by increasing the capacity of these
warehouses which are not economical.
At the operational level, operational plans are developed in order to perform and control the activities to
accomplish the tactical plans thus operational plans need to be developed for performing the logistics
activities from the fewer warehouses as decided in the tactical plans
A corporate mission is a statement setting out long range goals unique to each organization elucidating the
business the company wants to be in, which its customers are its basic beliefs about business, and its goals of
survival growth and profitability. Objectives and goals sets the targets which are to be achieved in the long
term in order to fulfill the mission of the firm in order to achieve the long term objectives and goals,
alternatives strategies or actions plans need to be evaluated in the context of the environment faced by the
firm from these alternatives specific strategies must be selected for implementation in order to meet the
objectives and goals that will fulfill the mission of the firm hence business strategy is a long range game plan
of an organization and provides a road map of how to achieve the corporate mission. The strategic or long
term plans for the firm and developed at the highest level of management of the firm.
WHAT IS LOGISTC INFORMATION SYSTEM AND ITS OBJECTIVES
Logistic information system is nothing but to manage, control and measure the logistical activities.
These activities occur within the organization or as well as overall across the supply chain.
Logistics information systems are important for achieving logistics efficiency and effectiveness. In an
enterprise, logistics information system seeks to achieve the following:
1) It ensures of logistics functional operations into a process pursuing customer satisfaction at the lowest
total cost.
2) Information system facilitates planning and control of the logistical activities related to order
fulfillment.
3) It makes the firm more competitive, by making better tactical and strategic decision for the benefits of
the firm and its customer.
4) Helps provide customers information regarding product availability, order status, and delivery
schedules promoting customers service.
5) It reduces the requirements of inventory and human resources by enabling requirements planning.
6) It interfaces with marketing, financial, and manufacturing information systems and provides
information to top management to help formulate strategic decisions for the whole firm.
.

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7) The use information technology in information systems has enabled quick response to demand making
forecasting redundant. This has also helped in implementing “pull” systems like just-in-time making
the firm more competitive.
8) It promotes systems that link the operations of the firm, such as manufacturing and distributing, with
the suppliers operations on the one hand the customer on the other.
9) In the other cases, organizations are finding that through information they can manage dispersed
inventories as if they were single inventory. The benefits of this can be considerable. If inventory
management is centralized and decisions on replenishment and other quantities are taken or the basis
that is a single stock, then only one safety stock instead of many required. The stock itself can be
carried anywhere in the system, either near the point of production or the consumption. This is the
concept of ‘virtual’ inventory management or electronic inventory management.
LOGISTICS IN BUSINESS
In the first half of the twentieth century, logistics existed as a fragmented and elusive activity with little
recognition beyond the military services and those firms that were a part of the military-industrial complex.
This began to change in the latter half of the twentieth century as business realized the potential benefits of
logistics. Logistics management is concerned with the development and implementation of a methodology for
ensuring the efficient and cost-effective attainment of logistic objectives. Logistics management is the most
widely accepted term and encompasses logistics not only in the private business sector but also in the
public/government and nonprofit sectors. In addition, service companies including banks, hospitals, restaurants,
hotels, and so on have logistics challenges and issues, and logistics management is an appropriate form for the
service industry.

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CHAPTER-6
LOGISTICS FOR COMPETITIVE ADVANTAGE

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LOGISTICS FOR COMPETITIVE ADVANTAGE
Martin Christopher has presented an interesting ‘Three C’s” model of competitive advantage:
The bases for success in the marketplace are numerous, but a simple model is based around the triangular
linkage of the company, its customers and its competitors – the ‘Three C’s’.
The source of competitive advantage is found firstly in the ability of the organization to differentiate itself, in
the eyes of customer, from its competition and secondly by operating at a lower cost and hence at lower profit.
Seeking a sustainable and defensible competitive advantage has become the concern of every manager who is
alert to the realities of the marketplace. It is no longer acceptable to assume that good products are sold
themselves, neither it is advisable to imagine that success today will carry forward into tomorrow.
Let us consider the bases of success in any competitive context. At its most elemental, commercial success
derives either from a cost advantage or a value advantage or ideally both. It is as simple as that – most
profitable competitor in any industry sector tends to be lowest cost producer or the supplier providing a product
with the greatest perceived differentiated values.
Put very simple, successful companies either have a productivity advantage or they have a ‘value’ advantage or
they have a combination of both. The productivity advantage gives a lower cost profile and the value advantage
gives the product or offering a differential ‘plus’ over competitive offerings.

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Diagrammatic Representation of Three C’s Model
Those firms that develop superior logistical competency are strategically positioned to enjoy hard-to-duplicate
competitive advantage in terms of cost and service performance.
It can be said that a firm achieves competitive advantage over its competitors by fulfilling customer
requirements (value advantage or effectiveness) at the lowest cost (productivity advantage or efficiency).
PRODUCTIVITY ADVANTAGE
In many industries there will be a competitor who will be a low cost producer and will have greater sales
volume in that sector. This is partly due to economies of scale, which enable fixed costs to spread over a
greater volume but more particularly to the impact of the experience curve.
Needs seeking benefits at
acceptable prices
Value Value
Cost DifferentialsAssets and
Utilization
Assets and
Utilization
Company Competitors
Customers

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It is possible to identify and predict improvements in the rate of output of workers as they become more
skilled in the processes and tasks on which they work. Bruce Henderson extended this concept by
demonstrating that all costs, not just production costs, would decline at a given rate as volume increased. This
cost decline applies only to value added, i.e. costs other than bought in supplies. Traditionally it has been
suggested that the main route to cost reduction was by gaining greater sales volume and there can be no doubt
about the close linkage between relative market share and relative costs. However it must also be recognized
that logistics management can provide a multitude of ways to increase efficiency and productivity and hence
contribute significantly to reduced unit costs.
 VALUE ADVANTAGE
It is a observed that customers don’t buy products they buy benefits. These benefits may be intangible i.e.
they relate not to specific product features but to such things as image and reputation. Unless the product or
service that we offer can be distinguished in some way from its competitors there is a strong likelihood that
the marketplace will view it as a ‘commodity’ and so the sale will tend to go to the cheapest supplier. Value
differentiation can be gained in numerous ways. When a company scrutinizes markets closely it frequently
finds that there are distinct value segments. In other words different groups of customers attach different
levels of importance to different benefits. Adding value through differentiation is a powerful means of
achieving a defensible advantage in the market. Equally powerful as a means of adding value is service.
Increasingly it is the case that markets are becoming more service sensitive and this poses a challenge in
management of logistics. It is important to seek differentiation through means other than technology. A
number of companies have responded to this by focusing upon service as a means of gaining a competitive
edge. Service in this context relates to the process of developing relationships with customers through the
provision of an augmented offer. This augmentation can take many forms including delivery service, after
sales service, financial packages, technical support and so on.
This matrix is a useful way of examining the options available for value and productivity advantage:
SERVICE LEADER COST & SERVICE
LEADER
COMMODITY
MARKET
COST LEADER
In commodity market situations where a company’s products are indistinguishable from their competitors’
offerings the only strategy is to move towards being a cost leader or towards being a service leader. Often the
leadership route is not available. This particularly will be the case in a mature market where substantial
market share gains are difficult to achieve.

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Cost leadership strategies have been based upon the economies of scale, gained through greater volume of
sales. This is why market share is considered to be so important in many industries. This cost advantage can
be used strategically to assume a position of price leader and make it difficult for high cost competitors to
survive. This cost advantage can come through effective logistics management. In many industries logistics
cost represents such a large part of total costs that that it is possible to make major cost reductions through
fundamentally reengineering logistics processes.
The other way to come out of the commodity quadrant of the matrix is to seek a strategy of differentiation
through service excellence. Customers in all industries are seeking greater responsiveness and reliability from
suppliers; they are looking for reduced lead times, just-in-time delivery and value added services that help
them do a better job of serving their customers.
Evolution of Norms for Manpower and Logistics
Requirements at Police Station, Sub-division and
District Levels
Greek verb ‘logistikos’ meaning compute or calculate, and French verb ‘loger’ meaning lodge are the roots of
the English noun ‘logistics’, meaning supply of supportive attributes like manpower, transport,
communication reticulation, weapons systems and
other facilitators in any operation as planned in advance, and accurately trace the true nature of an effective
logistics in terms of computed and calculated planning, and lodging or infixing the supportive tools as
calculated and planned in advance to be lodged at right
time, place and occasion to meet the needs of the operation for efficient performance and results, ipso facto
investing logistics and its execution a managerial edge. Logistics and logistics support imprimis are
managerial tools built on the bedrock of the management techniques. Logistics au fond is perficient material
management run with an edge of precise time management and efficient space management, made possible
with right foresight, creative vision, incisive planning and accurate execution. Evolution of norms for
logistics in police organisations is byword for the desire for the application of management principles to
policing and police organisations. It represents induction of the faculty of ratiocination to the field of policing
and police organisations. It is a visionary step and prognosticates the aurora of the scientific age in police
organisations. Logistics norms differ only in details from the Police Station level to the sub-division level to
district level while rest on the same bedrock of broad managerial techniques.
Prime Vectors
Both Police Station and District Police Administration are the pillars of the policing structure of India with
sub-divisions providing the links between the two. Sub-divisions derive their sustenance and draw manpower
and logistics from the Police Stations, ergo
strong and efficient Police Stations mean strong sub-divisions. In exceptional cases, subdivisions can always
depend upon the strength of the district police force. Sub-divisions as such do not have independent existence
apart from the Police Stations under them and
the district police administration that guides and controls them. Therefore, discussion on the logistics
requirements of the Police Stations and the district police administration inter se covers sub-divisions too.
Police Stations and district police administrations as the basic structures of the policing, need to be pollent
units capable of independently tackling crimes, security and law and order issues from their own
provenances, so that higher units are free to focus on larger issues of countrywide dimensions sans
distractions. For this to happen, the Police

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Stations have to be full-fledged units as far as their manpower and logistics requirements are concerned
without the need of asking and waiting for the help extra muros. A sense of autarchy and autarky is basic
here. The change brings pride to the unit and boosts morale bringing in high motivation and inculcating lofty
purpose to the job of policing. The end result will be quality and often competitive performance of very high
order in policing which sadly is a mere dream in the extant policing structure of India.
Police Station setup of present India grievously falls short in logistics and infrastructure support
whether it is in manpower, transport, communication network, weapon systems or financial powers. Though
district police administrations are in far better position than the Police Stations in all compartments en face
respective requirements, they too are far from an ideal position in respect of their requirements. While Police
Stations must look to
the district police administration for help for manpower and logistics support for every uncommon situation,
the district police administration in turn looks to the state headquarters for elbow space. Even begging other
government departments for transport
and other infrastructure facilities is not unheard of. This is not an ideal situation by any stretch of imagination
to any police setup and should stop.
Armed Police Units
Both Police Stations and district police administrations should become self-contained units in respect of
manpower, transport facilities, communication reticulatum, weaponry and other logistics requirements. Every
Police Station should convert into a nidus of
police functions under an officer of the rank of Police Inspector assisted by scores of Sub-Inspectors in charge
of different policing functions like crime, traffic, headquarters, intelligence, law and order and armed police.
Every Police Station must have a unit of its
own armed reserve under a PSI that provides men also for extraneous duties like guards,
courts, summons, orderly services apart from being the striking force. The armed police units of the district
police administration need to be strengthened in most districts and properly trained.
Intelligence Gathering
Both Police Station and district police administration setups as far as intelligence gathering is concerned is in
extremely poor shape uniformly in most states of India, save a few like Jammu and Kashmir where the need
of self-preservation perforce dictated
terms to strengthen the intelligence apparatus. Intelligence is the bedrock of effective policing and sine qua
non for professional policing. Intelligence gathering and analyses apparatchik is the principium among the
core logistics supports that makes difference to the quality of the policing process in both the Police Station
and district police administration levels. Districts do have structures to handle both the crime and law and
order intelligence, though poorly equipped and seldom made use of, while the same in the
Police Station levels is almost nonexistent. Intelligence gathering apparatchik needs to be strengthened at
both the levels to enrich policing process with relevant intelligence. An officer of the rank of PSI with
adequate staff in a Police Station should be in exclusive
charge of collecting both the crime and law and order intelligence to strengthen the hands of the officer
heading the Police Station.

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Mini Police Commissionerates
Police Stations as centres of policing functions must work as mini police commissionerates sans magisterial
powers and treated as such in importance and powers. Trust begets trust and trust sprouts responsibility. Once
Police Stations revive respectability and importance on par with that of the British vintage, they may regain
their whilom aureole at no time. This is so also with the district police administrations. Indeed, there are the
issues of corruption and misuse of powers that are beyond the scope of this discussion and it suffices to state
that appropriate checks and counterchecks
should be in place to counter such eventualities.
Nidus of Police Functions
Pollent Police Stations as the centers of police functions justifies fewer police stations around and
irrationalise the present donnert trend among the top-brass of crying wolf for creating more and more police
stations at every possible opportunity and howling hoarse for many more to create ‘gulli-gulli police station’
situation with most of them weak and incapable of independent existence and just meant as mere show-pieces
for the public consumption and adding to the welter in jurisdictional and other complications. The
epinosic response is owing to the copycat mindset so prolate among the Indian police leadership of the post-
independent vintage. Quantity is an irrelevant concept in the extant age of hi-tech world, and transport and
communication explosions render the world
increasingly smaller every passing day. What is required is quality. The stress must be on resourcefulness and
response time. Fewer Police Stations, each a nidus of the police functions at strategic locations and self-
dependent in its manpower and other logistic
requirements of transport, communication, weaponry and related facilitators is the need of the hour. Control
room oriented policing with shortened response time are capable to tackle any kind of police emergencies and
contingencies within a given area. District
police administrations must function as the custodian and provider of special techniques, high-tech gadgets
and higher counseling and guidance to the benefits of the Police Stations apart from its extant conventional
duties.
Control Rooms
This brings the issue of control room oriented policing that suits best in urban areas to the fore. Shift systems
round the clock and response time are the key factors in such a policing system. Logistics support becomes
the crucial issue in the control room oriented policing system as the effectiveness of the system depends tout
a fait on effective logistics designs, planning and management in place. Police Stations fully self-dependent
in manpower and other logistics supports like transport, communication, weaponry and other facilitators
alone can handle control rooms successfully for perficient policing. Such a system presupposes committed
manpower working on round the clock shifts and requiring high morale. High morale in turn depends on job
satisfaction and right job culture that are built on perfect man management practices. All these issues need to

31
be tackled one after the other for efficient policing. Indian police of present days is a far cry from those
objectives.
Manpower
In a country bogged down with endemic unemployment, and steeped in cheap labour, manpower should not
be a problem though eurhythmic quality production may often become an issue. No discussion on manpower
is complete without the factors of morale, motivation, competence, discipline and commitment are taken into
account. No analysis on logistics is complete without the production factor of the manpower is assessed.
Shift System
Policing being a round the clock responsibility, a three-shift system is sine qua non in a grass-root policing
unit like the Police Station. And unlike now, the system must be statutorily defined and duly moulded and
rounded off for effective functioning with clearcut division of labour in place. Lack of this clarity and
arbitrary day-to-day allotment of duties on one’s own fancies by lower ranks in the Police Stations is the
radicis of all the maelstrom in manangement noticed in police stations these days resulting in low and
inefficient turn-out of work. A well-defined shift system and purposeful man management policy directed
towards high motivation and morale should work as the nostrum to the malady.
Efficient Man Management
Sound incentive schemes based on the innards of the human psyche and latest managerial techniques and
committed leadership models can do the tricks to maximize the output with the minimum input and save the
criminal wastages in manpower that are common features of the present man management in Indian police,
where a few islands of manpower are over-worked while most wanze precious man-hours without productive
output. Any step to break this epinosic trend will save Indian police from gargantuan manpower wastages.
This aspect needs priority. An important feature of the efficient man management is best utilization of
the available manpower talents. Indian police of the post-independent vintage is notoriously profligate in
frittering away and even curbing precious human talents that land on its lap by its good fortune. An example
is that of a brilliant police officer from an Indian state who made name as a poet, an intellectual and an
original thinker on police and policing subjects with scores of published books on poetry and policing
subjects to his credit and a popular writer on police subjects on all major English newspapers, and well-
known for his immaculate conduct and foursquare character, being persistently and consistently harassed
gratuitously for decades, denied promotion for more than twenty-one years without offering a reason in the
ambience of no reasons existing, often denied facilities normal even for his posts and repeatedly forced to
work in the rank of Superintendent of Police under his far less talented and far less upright juniors from his
own batch now in the rank of IGPs. Such atrocities are possible in Indian police these days. Reason for the
reductio ad absurdum of the man management in Indian police of the present vintage to this scale is just
jealousy and fear among the higher-ups of being overshadowed by his superior talents. His fault lies in the
denial to approach the court of law in propugnation of own interests in spite of promptings from well-
meaning seniors and his preposterous pride in deciding that what are his, must come by themselves sans
promptings from any quarters and philosophizing che sara, sara. He continues in the plight even now without
promotions. This is an example of the criminal wastage of human talents apart from cruelty and crimes
involved. Just thinking how best and to what advantages an efficient organisation would have made use of his
talents by providing right incentives rather than curbing and crushing his normal opportunities makes this

32
example of negative norms of the Indian police an eye opener. Such perversions and prevarications of the
man management norms of epinosic dimensions must stop. It is a different story that he did
not wither away like most in similar situations and made big name and brilliantly succeeded in other avenues.
It is true that true talents cannot be hidden and even villainy of the top brass of the police has limits in curbing
and crushing the talents of the fonctionnaire lower down. This is the brighter side of the spiel.
Precious Man Power
Every employee in any efficient organisation is a precious asset. This is not because labour comes at
enormous cost, but because of the presence of innate potentialities in every person and its mammoth utility
were they are adequately tapped. The problem lies
in the need and competence to extract the potentialities and talents. Police organization has a long tail of
hierarchy of seniors after seniors. The billion-dollar question is whether this long tail of seniority of the police
department has any relevance as far as leadership and leadership qualities are concerned. The answer is a big
“no”. Present Indian police is least bothered about the need of sound leadership and leadership qualities in its
body as far as seniority goes and sadly leadership and seniority are synonymous in its diction. That must stop
and the organisation must constitute per se a climacteric norm to enable the resorgimento of the Indian police
to draw it out of its present chilling hiems. None realises the importance of every single human hand available
as the USA does, and the care taken and the investment made on each hand in American armed forces are
legendary. India and Indian police though cannot fully follow the American ideal because
of its financial constraints and other reasons, the model sine dubio deserves avizefull consideration to aemule
as a vaulting norm adapted to Indian milieu. Human being a natura rei is potential of extending and shrinking
to any scope created for him. This is so
also in work environment. A man or woman treated as lowly and dispensable as it is in the constabulary and
other lowly ranks of the Indian police, shrinks au naturel to adjust to the space created for him, and expands
and extends to be der Unsterbliche ubermensch
if he or she is provided for and treated as such. Indian police lacks this insight to the human psyche and pays
heavily in terms of human cost for the grave incompetence. How fast Indian police realises this fault, so good
it is pour-soi. Maximum output out of minimum resources is the motto here. Maximum output should be the
norms of manpower management in Indian police at all levels rather than going for blind increase in
manpower strength at every possible occasion. High morale, high motivation and job contentment, high
professional pride, adequate rights and responsibilities, reasonably sound infrastructure and logistics support
are the claves for productive and perficient policing and make difference to the quality of the policing
whether it is in Police Station levels or district police administration levels. This brings the issue of logistics
support to the fore.
Logistics Support
Logistics and infrastructure supports are the core of effective policing and also serve as the multiplier of
manpower. Transport and communication logistics are the eyes and ears of the perficient policing. In the age
of hi-tech crimes and criminals, high-level logistics support is sine qua non for the policing to be successful.
Right logistics support has four dimensions or factors to be useful and effective in policing: quantity factor,
quality factor, relevancy factor and time factor. Quantity factor covers availability of adequate logistics
support; quality factor covers availability of latest and hi-tech logistics support; relevancy factor covers the
need of logistics support being relevant to the needs of the policing; and time factor refers to the availability
of the logistics support at right occasion and time. Inadequacy in any of these factors certain to affect the
quality of the policing and needs foremost attention of the police leadership to keep the police and policing in

33
top gear. In Indian situation, the principium of the four factors namely the quantity factor itself often is a
major hurdle because of financial constraints and other problems though recent
rise in terrorism alerted the bureaucratic and political leadership to awaken to this problem and make more
and more logistics support available to police de grado in grado. But, the quality factor continues to be a
major pain in the spine. Criminals are often found in India better equipped than the police as far as hi-tech
gadgets and even crucial intelligence are concerned. Indian police lacks adequate organizational strength and
expertise to keep up dated to the research explosions in the world market in hi-tech gadgets in transport,
communication, information and weaponry systems. This shortfall needs to be attended on priority if Police
Stations and district police administrations to be effective in defeating crime and criminals in their own
games. Whatever done at present in this field are sporadic attempts sans systemic efforts. This lacuna needs to
be rectified. Relevance and time factors are logistic maneuvers tout court involving human assessments and
decision making in the process of the policing and depends assez bien on human excellence involved and
requires improved human qualities. That comes by practice, skill, training, commitment and mature
leadership. These factors also need close attention in efforts to give quality policing to the country.
Maintenance
Any talk on logistics is incomplete without a discussion on maintenance, which is the weakest link in the
mindset of the Indian psyche. Maintenance inherently is the byproduct of a disciplined mind that is anathema
to the Indian psyche. Naturally Indian police is pathetically poor in maintenance aspect of whatever it does.
One factor responsible for this perilous assuetude is the cost factor involved. The second factor that brings
about this neglect of the maintenance structure in the organisation is the lack of appreciation of the need of
the maintenance in running an organisation and carrying out its operations. This achilles’ heel of the Indian
psyche holds its sway in police organisations also. Sound maintenance of the logistics infrastructures and
other assets is sine qua non for sound policing and perhaps gets precedence in importance over acquiring new
gadgets and assets. A sound police organisation just ne obliviscaris this crucial need that considerably
contributes to the success of police operations.
Financial Powers
Police Stations as the nidus of police functions with considerable manpower and huge logistics support means
in its possession and responsible for their maintenance perforce need considerable financial powers for
themselves so that they can look after themselves without waiting for sanctions from above. This investment
also boosts the confidence and self-reliance of the Police Stations as independent units apart from bringing
respectability
and accountability to them unlike now. The advantage here is both physical and psychological and needs
priority attention.
Strategic Location
It be a Police Station, district police administration or any other police unit, its effective functioning depends
very much on small details like its location and building also. They have to be located at a place decided upon
after careful study of the issues involved and
operational facility and convenience considered not only for the easy access to the public,but also for more
crucial strategic reasons of operational considerations like facile movements, easy logistics support, access to
hi-tech equipments, easy access to key manpower assets, convenience for secret operations et cetera. This
important factor is often ignored in Indian police and it is common to find a Police Station situated in a
locality outside its jurisdiction in urban areas and district police administration being located in an unplanned
shabby rented building in a busy and strategically unsound locality. Easy availability often guides such

34
decisions in Indian police. Such casual approaches in such key decisions should stop and proper norms should
be laid to bring order in such key decisions and avoid concomitant mishaps.
Norms are mere standards, or more precisely, standard customs to be set or evolved. Indian police as
defined and structured by the British administration more than a century back served the British
administration and its objectives in a far less complex milieu appreciably for nearly a century and later. But,
in a situation of panta rhei, the antianus reticulation is ascensively becoming unfit and incompetent to the
changing trends of the crime and criminality and may become entirely irrelevant to the changed complexities
of crime and criminality if immediate corrective steps are not taken and new norms are evolved and set for
the posterity. In a donnert police structure steeped in blinkers and mental inaction, the very idea of evolving
fresh norms for manpower and logistics is a highly welcome initiative and deserves hearty plaudite.

35
CHAPTER - 7
Logistics Industry: Global and Indian Perspectives

36
Logistics Industry: Global and Indian Perspectives
Logistics management is increasingly becoming a topic of interest among academicians and practitioners
since it may lead to reduced operational costs, improved delivery performance and increased customer
satisfaction levels.
The global logistics industry is estimated to be worth USD 300 billion. Though most of the large service
providers are headquartered in Europe, the biggest market is the US, which captures about one-third of the
world market. The global logistics industry is characterized by high costs of operations, low margins,
shortage of talent, infrastructural bottlenecks, demand from clients for investing in technology and
providing one-stop solutions to all their needs, and consolidation through acquisitions, mergers and
alliances.
Though, in India, the industry is still in its infancy, there is immense potential for growth. The
Indian logistics industry is currently plagued with low demand, poor infrastructure, high costs,
government regulations etc. However, it is going to turn around on the back of robust GDP growth,
globalization, FDI in logistics and increasing government support. This paper highlights the current
state of the industry, including the dynamics and opportunities for growth, globally, in general, and in India,
in particular, based on findings from surveys of logistics service providers, and users, of India and other
countries.
Introduction
Logistics and supply chain management (SCM) as an area of research has been getting increasing attention
from academicians and practitioners over the last two decades since it may lead to reduced operational
costs, improved delivery performance and increased customer satisfaction levels, thereby making an
organization more competitive in terms of cost, quality, delivery and flexibility. The importance of logistics
and SCM is increasing also due to globalization as more and more multi-national companies (MNC) are
sourcing, manufacturing and distributing on a global scale, making their supply chains very complex to
manage. However, outsourcing logistics activities to experienced logistics service providers (LSP), also
known as third-party logistics (3PL) providers, may enable companies get very efficient and
customized logistical support while themselves focusing on the core organizational activities. Today,
there are many large multi-national LSPs that offer complete supply chain solutions across many diverse
countries in terms of their socio-economic and political environments. Apart from core logistical
activities such as transportation and warehousing, LSPs also offer value-added services such as
customs clearance, freight forwarding, import/export management, inventory management,
assembly/installation, packaging and labeling, distribution, after sales support, reverse logistics and so on. By
outsourcing logistics, companies can leverage the expertise of LSPs while concentrating on their core
competencies.

37
In literature, logistics and SCM are often used interchangeably, though there is a subtle difference
between the two. While SCM is more strategic in nature, logistics is more operations-
oriented. The evolution of logistics and SCM in the 1990s can be traced back to “physical
distribution management” in the 1970s when there was no coordination among the various
functions of an organization, and each was committed to attain its own goal. This myopic
approach then transformed into “integrated logistic management” in the 1980s that called for the
integration of various functions to achieve a system-wide objective (Vrat, 1999; Seturam, 1999).
SCM further widens this scope by including the suppliers and customers into the
organizational fold, and coordinating the flow of materials and information from the procurement
of raw
materials to the consumption of finished goods. The objectives of SCM are to eliminate
redundancies, and reduce cycle time and inventory so as to provide better customer service
at lower cost. The focus has shifted from the “share of the market” paradigm to the “share of
the customer” paradigm, wherein the goal is to create “customer value” leading to increased
corporate profitability, shareholder value, and sustained
competitive advantage in the long run (Evans and Danks, 1998). The successive stages of
evolution of logistics and SCM, the central characteristics of each stage, and the drivers of
change are shown in Fig. 1.

38
Literature on the logistics industry is abundant in the form of survey-based empirical research
and reviews of extant literature. Notable surveys of logistics users of different countries include,
among others, Langley et al. (2007) (North America, Latin America, Europe and Asia-
Pacific), Lieb and Bentz (2005) (North America), Lieb et al. (1993) (North America and
Europe), Arroyo et al. (2006) (Mexico), Cilliers and Nagel (1994) (South Africa), Dapiran
et al. (1996) (Australia), Mollenkopf and Dapiran (2005) (Australia and New Zealand), Kim
(1996) (Korea), Bhatnagar et al. (1999) (Singapore), Sahay and Mohan (2006) (India),
Sohail and Al-Abdali (2005) (Saudi Arabia), Sohail et al. (2005) (UAE) and Aktas and
Ulengin (2005) (Turkey). In these surveys, logistics managers of user firms are asked to respond
to issues such as reasons for outsourcing, number of activities outsourced and volume of
outsourcing, logistics budget allocated to outsourcing, impact of outsourcing on cost, service
level, customer satisfaction and employees, experience on collaboration with LSPs,
expectations and future plans. All these surveys indicate growing needs of outsourcing,
higher allocation of logistics budgets to outsourcing, and longer and deeper collaboration
with LSPs. Long association with a service provider proves to be beneficial for both the user
and the service provider. Building and sustaining a successful logistical alliance requires,
besides mutual trust and transparency, a cultural synergy between two different organizations,
clear internal assessment of logistics cost components and outsourcing only those services
that are really needed, not giving up complete control of the supply chain, an
unambiguous contract minutely detailing the roles of and expectations from the service
provider, development of key performance indicators and incorporation of the same in the
contract, close monitoring of the performance of the service provider, and constant dialogue
and communication with the service provider. As far as the impacts of outsourcing are
concerned, most of the firms have experienced either positive or very positive impacts on cost,
service delivery and customer satisfaction level. The only negative impact of outsourcing that
was reported was employee dissatisfaction, which may be caused due to the shift of
responsibility, and hence authority, and probable downsizing of logistical workforce. The
expectations of user firms range from offering more value-added services to globalization
of operations by LSPs so that they could avail of services of a limited number of LSPs for all
their logistical needs.
For example, Exel Logistics has a contract with Motorola to manage large parts oits
supply chain in Amsterdam, Chicago, Hong Kong and Singapore. Unilever is
looking to Exel to provide warehousing services in Brazil, Mexico, the UK and
the US (Bot and Neumann, 2003). IBM has outsourced the management of its
service parts supply chains in North America and Europe to UPS while its finished
goods supply chains are managed by Menlo Worldwide and Geodis in North
America and Europe, respectively (Bowman, 2006).
While literature from the perspectives of logistics users is abundant, the same from the
perspectives of LSPs is scarce. In their survey, Lieb and Butner (2007) asked 22 top North
American LSPs to respond to issues such as mergers and acquisitions, managing
relationships, differentiating the company in the marketplace, adoption of new technologies,
industry dynamics, and future prospects of the industry and the company. Respondents

39
perceived more merger and acquisition activities, continued globalization and broadening of
service offerings, more collaborative relationships, evolution of
niche players, gradual adoption of new technologies such as RFID (Radio Frequency
Identification), continued problems of high-cost, low-margin and lack of management talent,
and steady growth of revenue and profitability of both the industry and the
company. The logistics industry is growing very fast in south-east Asian countries
due to a shift of manufacturing base and increasing volumes of exports from these
countries. A survey of Indian LSPs (Mitra, 2006) found the logistics industry in India very
promising, currently growing over 20% per year. Though the estimated size of the industry is
still miniscule (~ USD 1-1.5 billion) and the industry is still concentrated (20% of the
respondents accounted for nearly 90% of the total revenues), there is immense potential
for growth as the Indian GDP is growing at over 9% for the last couple of years
compared to the world
GDP growth rate of 3% and a lot of consolidation activities are taking place as more and more
multi-national LSPs are expanding their presence in India through direct investments,
acquisitions and alliances. The main roadblocks identified by the respondents to the growth of
the industry in India were the lack of trust and awareness among Indian shippers and poor
physical and
communications infrastructure. However, it was also pointed out that Indian shippers are
gradually realizing the benefits of outsourcing and the government is taking steps in the right
direction for
development of infrastructure.
Reviews of extant literature on the logistics industry are available in Maloni and Carter
(2006) and Selviaridis and Spring (2007).
The organization of the paper is as follows. The next section gives an overview of the
global logistics industry, an estimate of its size, and current status and dynamics of the
industry. The subsequent section gives an overview of the Indian logistics industry, its
competitive dynamics, and problems and prospects of the industry. Finally, managerial
implications are presented in the concluding section.
Global Logistics Industry
This section gives an overview of the size of the global logistics industry and its current status
and prevailing dynamics.
Size of the global logistics industry
Currently the annual logistics cost of the world is about USD 3.5 trillion. For any country, the
annual logistics cost varies between 9% and 20% of the GDP, the figure for the US being about
9%. US-based Armstrong & Associates, Inc. tracks the issues and trends in the world logistics
market and in the US logistics market, in particular, in their annual surveys of top 25 global
LSPs. According to the firm, the global logistics market sizes in 1992, 1996 and 2000 were USD
10 billion, USD 25 billion and USD 56 billion, respectively. In 2003 and 2004, the corresponding
figures were USD270 billion and USD 333 billion, registering high growth rates. Though most of the

40
large LSPs are headquartered in Europe, the US logistics market is the largest in the world capturing
one-third of the world logistics market. In 2003, it was about USD 80 billion. In 2004, it grew to USD 89
billion, and in 2005, it registered an impressive growth rate of 16% to cross the USD 100 billion mark
for the first time and reach USD 103.7 billion (Foster and Armstrong, 2004, 2005, 2006). However,
considering the fact that the logistics market in the US is about 10% of its annual logistics cost (Foster
and Armstrong, 2006), there is still immense potential for growth of 3PL in the US in particular, and in
the world in general.
Current status and dynamics of the industry
The extant literature on the logistics industry points to a number of issues that service providers
have to address, such as pricing pressures, high costs of operations and low returns on
investments, hiring andretaining talent, pressure from clients to broaden the range of service
offerings and internationalize operations, demand for customized solutions and more value-added
services, besides infrastructural bottlenecks and government regulations. Service providers complain
that clients expect them to have the latest software, databases and ERP (Enterprise Resource
Planning) packages, and invest in new technologies such as RFID and satellite-based real-time
tracking systems. Clients perceive that these investments are part of the basic service package, and
often do not want to match the same with increased payments for these additional services. Pressure
from clients to broaden the range of service offerings and internationalize operations, has forced
service providers to look for suitable alliances, mergers and acquisitions that help fill the gaps in
service offerings, and industry verticals and geographic areas served, achieve economies of scale and
enhance service providers’ capability to support international operations. Currently, the world
logistics market is going through a consolidation phase. Tibbett & Britten Group of North America
was acquired by Exel Logistics in August, 2004, and Deutsche Post World Net, parent company
of DHL, took over Exel in December, 2005. Bax Global was taken over by Deutsche Bahn,
parent company of Schenker, in November, 2005 while A. P. Möller acquired P&O Nedlloyd in
February, 2006, and TNT Logistics was sold to Apollo Management L. P. in November, 2006. However,
mergers and acquisitions have their own set of problems in terms of integration of two diverse business
units. Carbone and Stone (2005) tracked the evolution of 20 leading European LSPs between 1998 and
2004 in terms of their approach to mergers, acquisitions and alliances, and found that although growth
led to more coverage, integration of two different cultures was one of the most difficult challenges
faced by these firms in the consolidation process. Recent trends in the logistics industry indicate
that to be successful, service providers have to differentiate themselves from their competitors in
terms of offering value-added services, focus on key customer accounts that have the potential to
generate high profitability for a long term, enter into suitable alliances to complement the range of
services offered and geographic areas served, and sell logistics services to clients’ suppliers and
customers, thus leading to complete supply chain integration.
Indian Logistics Industry
This section gives an overview of the size of the Indian logistics industry, its competitive dynamics and
future prospects.
Size of the Indian logistics industry

41
The annual logistics cost in India is estimated to be 14% of the GDP, which translates into USD
140 billion assuming the GDP of India to be slightly over USD 1 trillion. Out of this USD 140 billion
logistics cost, almost 99% is accounted for by the unorganized sector (such as owners of less than 5
trucks, affiliated to a broker or a transport company, small warehouse operators, customs brokers,
freight forwarders, etc.), and slightly more than 1%, i.e. approximately USD 1.5 billion, is contributed by
the organized sector. So, one can see that the logistics industry in India is in a nascent stage.
However, the industry is growing at a fast pace and if India can bring down its logistics cost
from 14% to 9% of the GDP (level in the US), savings to the tune of USD 50 billion will be realized at
the current GDP level, making Indian goods more competitive in the global market. Moreover, growth
in the logistics sector would imply improved service delivery and customer satisfaction
leading to growth of export of Indian goods and potential for creation of job opportunities.
Competitive dynamicsand other issues
The following problems existing in the Indian logistics industry make it unattractive for
investments and also create entry barriers.
Logistics is a high-cost, low-margin business. The problem of organized players is
compoundedby unfair competition with unorganized players, who can get away without paying
taxes and following operating norms stipulated in the Motor Vehicles Act such as quality
of drivers and vehicles, volume and weight restrictions, etc.

Economies of scale are absent in the Indian logistics industry. Even the organized sector that
contributes slightly more than 1% of the logistics cost, is highly fragmented. Existence of the
differential sales tax structure also brought in diseconomies of scale. Though VAT (Value
Added Tax) has been implemented since April 1, 2005, failure in implementation of a uniform
VAT structure across different states has let the problem persist even today.
Apart from the non-uniform tax structure, Indian LSPs have to pay numerous other taxes, octrois,
and face multiple check posts and police harassment. High costs of operation and delays involved in
compliance with varying documentation requirements of different states make the business
unattractive. On an average, a vehicle on Indian roads loses 24-48 hours in complying with
paperwork and formalities at different check posts en route to a destination. Fuel worth USD 2.5 billion is
spent on waiting at check posts annually. A vehicle that costs USD 30,000 pays USD 7,500 per annum in
the form of various taxes, which include the excise duty on fuel. This is why freight cost is a major
component of the cost of a product in India.
There is lack of trust and awareness among Indian shippers with regard to outsourcing logistics. The
volume of outsourcing by Indian shippers is presently very low (~ 10%) compared to the same for the
developed countries (> 50%, sometimes as high as 80%). The unwillingness to outsource logistics on part
of Indian shippers may be attributed to skepticism about the possible benefits, perceived risk, and
losing control, of sensitive organizational information, and vested interests in keeping logistics
activities in-house.
Indian shippers expect LSPs to own quality assets, provide more value-added services and act as an
integrated service provider, and institute world-class information systems for more visibility and
real-time tracking of shipments. However, they are unwilling to match the same with

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CHAPTER – 8
THE QUIET REVOLUTION
THE QUIET REVOLUTION

43
Business technology has the power to enrich those recognize the benefits are all too often left
watching the suc-cessful from the sidelines. This is even truer when technology shifts so
rapidly that complacent business models cannot or will not adapt. What- ever the truth of
evolution in the biological world, survival ofnational logistics has matured accordingly, allowin
good to be moved over ever-increasing distances within an ever-decreas-ing amount of time. As
the complexity of global goods movement has grown, however, the mechanisms for keeping it
working smoothly have not kept up with the inherent philosophy of the logistics science itself
— namely efficiency. There is no arguing that the actual movement of goods today is more
efficient than at anytime in history. However, for the most part, the philosophy of efficiency has
not translated over into the processes behind the movements of those same goods. Only the
whole system functions in the world of the fittest and natural selection are primary factors in the
success of any business.
Innovation
As long as there has been business, technology and its innovations have provided that extra
evolutionary advantage that has allowed business leaders to succeed. From the invention of the
abacus to the creation of modern telecommunications, technological innovation has been the primary
tool of business evolution. Those that ride these waves of innovation surge forward; those that do not
are left behind
to play catch up.
The logistics field has seen its own shareof technology revolutions, and in each case, the early
adopters have scored early business victories. One needs to look no further than thecontainer
revolution that began in the late 1950s. Vanguards of the technology such Malcom McLean and
Matson Navigation surged so far ahead in the industry that it took others years to catch up. Today,
another revolution is taking place in the logistics industry. While not as vis-ibly transformative as the
shift from cargo nets to gantry cranes, this digital revolution promises to be as economically
profound. Also unlike those technology shifts of the past, there are no cannon shots to mark this
revolution — no stormings of proverbial Bastilles.
This is the quiet groundswell revolution of Global Trade Management technology, and its
proponents are rallying beneath the
tricolor banner of “visibility, efficiency, and flexibility.” Like other key technologi-cal revolutions,
it is also becoming clear that, barring the introduction of a furtherinnovation, this shift in the
industry is inevitable. efficiency, while the parts seem to reside somewhere else.
Consider this: Today, a cargo container can be moved from China to California in less time than
it took Thomas Jefferson to travel the 250 miles from his home in Virginia to the First
Continental Congress in Philadelphia circa 1770. And yet, the movement of this single
container of goods may generate more paperwork than Jef-ferson himself created during his
entire 16 month stay in Philadelphia, including the Declaration of Independence.

44
Despite this tidal wave of data to move a single container, this data remains very pas-sive. It
is listed, collated and stored, but until recently rarely available on demand in real time. Without
the technology to transform this passive data into active information, visibility remains an
elusive goal of the industry. Lacking this visibility, it remains
a challenge for logistics firms to maximize their responsiveness and flexibility to both
customers and their own business.
Revolutionary
However, Global Trade Management technology — namely GTM software and information
systems — is providing solu-tions to all of these problems.
Global Trade Management technology seeks to streamline all aspects of a global supply chain,
from orders to logistics to set-tlement activities to financials — all in the name of improving
operating efficiencies and cash flows. The promise is drasticallylower cost supplies and
operations, withouta concomitant increase in costs.

45
CHAPTER - 9
GLOBAL LOGISTICS
Global Logistics

46
1.1 INTRODUCTION
1.1 Evolution of Logistics
The evolution of logistics in the 1990s can be traced back to “physical distribution
management” in the 1970s when there was no coordination among the various functions of
an organization, and each was committed to attain its own goal. This myopic approach then
transformed into “integrated logistic management” in the 1980s that called for the integration
of various functions to achieve a system-wide objective. SCM further widens this scope by
including the suppliers and customers into the organizational fold, and coordinating the flow
of materials and information from the procurement of raw materials to the consumption of
finished goods.
The objectives of SCM are to eliminate redundancies, and reduce cycle time and inventory
so as to provide better customer service at lower cost. The focus has shifted from the “share
of the market” paradigm to the “share of the customer paradigm, wherein the goal is to create
“customer value” leading to increased corporate profitability, shareholder value, and
sustained competitive advantage in the long run.
Logistics involves getting, in the right way, the right product, in the right quantity and right
quality, in the right place at the right time, for the right customer at the right cost. The
logistic network consists of the suppliers, the retailer and the users. The purpose of an
integrated logistic network in a supply chain is to fulfill customer orders through providing
place utility to deliver products and services to end users. The place utility is achieved by
managing a number of key functions of a supply chain. The functions include:
 Demand management
 Inventory management
 Transportation
 Warehousing
 Order processing
 Information Management
Logistics is a key enabler of supply chain collaboration. Improving performance in this field
allows supply chains to increase their efficiency significantly and help to create innovations
in different areas. In this context, an important task is to find structures and approaches
which enable all types of performance management in logistics and supply chains for a better
fulfillment of customer needs.
Supply chain management is a cross-function approach including managing the movement of
raw materials into an organization, certain aspects of the internal processing of materials into
finished goods, and the movement of finished goods out of the organization and toward the
end-consumer. As organizations strive to focus on core competencies and becoming more
flexible, they reduce their ownership of raw materials sources and distribution channels.

47
These functions are increasingly being outsourced to other entities that can perform the
activities better or more cost effectively. The effect is to increase the number of
organizations involved in satisfying customer demand, while reducing management control
of daily logistics operations. Less control and more supply chain partners led to the creation
of supply chain management concepts. The purpose of supply chain management is to
improve trust and collaboration among supply chain partners, thus improving inventory
visibility and the velocity of inventory movement. There are four major decision areas in
supply chain management:
1) Location
2) Production
3) Inventory
4) Transportation (distribution)
And there are both strategic and operational elements in each of these decision areas.
Distinguishing Logistics and SCM
In literature, logistics and SCM are often used interchangeably, though there is a subtle
difference between the two. SCM is more strategic in nature whereas logistics is more
operations-oriented. While SCM deals more with the linkages in the chain, contracts and
relationships, supplier selection, information and financial flows besides materials flows,
creating new facilities such as plants, warehouses and distribution centre’s, and broader
issues such as society, economy, government and environment, the scope of logistics is more
or less confined to the routine job of transportation and storage of goods. However, if one
deeply ponders, one may realize that logistics is the core of SCM, and if logistics fails, the
whole chain snaps.
Though logistics deals with mundane vehicles, warehouses, layouts, material handling
equipment, Motor, Vehicles Act, toll tax, sales tax, documentation etc., efficient management
of it has the potential to make the chain taut and agile. Therefore, there is growing interest in
logistics, and hence in SCM, around the world.
GLOBAL LOGISTICS AND SCM
Until a few years ago, logistics was rarely a subject discussed in the executive suites of large
corporations. But today, in the highly competitive global world, logistics has moved from the
basement to the boardroom. Initially the concept was to increase sales. Today, the concept
goes beyond that to include managing costs. And the most obvious factor, why global
logistics is now getting great attention is this four letter word- cost.
Logistics is applicable to every industry; be it construction, express delivery, automobiles,
management of airports, retail, or any other. We increasingly find goods from all over the
world around us-Korean cars, Italian fashion goods, Swiss cheese, South African wines,
Indian garments, Japanese electronics and more. The focus remains not only on getting them
available locally but getting the right product, at the right time, in the right quantity, at the

48
right place, in the right condition, at the right cost. This is indeed what gives a company an
edge over its competitors-and is increasingly the biggest challenge they face.
One of the most complex jobs today is of a logistics and supply chain manager. The rapid
reduction of international trade barriers has led to an equally rapid growth of the logistics
industry. The globalization that is a by-product of extensive use of the Internet has increased
the need for a flexible logistics infrastructure to support a global supply chain, enabling the
movement of goods from a growing number of source locations to meet market demand.
The logistics sector comprises two primary segments – the shipper community (defined as
those organizations who manufacture and sell products) and the service provider community
(those organizations who provide transportation, distribution and related services). Although
each of these segments has a different perspective, the key enabler for logistics excellence is
information. The real-time exchange of this information, to include all parties, is a key
enabler to supply chain management. This facilitates supply process visibility, exception
notification, advanced receipt of shipment line item details as well as proof of delivery
information.
Global Supply Chain Management
Because of competitive pressures in the global marketplace, companies are rapidly migrating
to low-cost sources of labour and materials, which are typically located in countries that also
represent emerging market opportunities. But the speed of this change may bring challenges
associated with escalating shipping costs and increased supply chain risk, and these
challenges could exceed a company’s internal skill and resource capacity. If we are adopting
global sourcing practices, we may not yet have the foreign trade experience necessary to
manage regulatory compliance and related global supply chain management complexities.
For example, multiple, autonomous business units within an organization can contribute to a
fragmented logistics process as well as create missed opportunities for leveraging
economies-of-scale. Individual business units may also lack the necessary economies-of-
scale needed to establish a competitive foothold and gain sufficient influence in emerging
markets.
Balancing inbound and outbound supply chain logistics requires a comprehensive strategy
that incorporates all the key functions of a supply chain to accelerate or expand sourcing
from emerging markets. This horizontally integrated approach also helps you make strategic
decisions regarding partnerships, shipping and other factors, to help ensure that savings from
global sourcing are not eroded
by increased logistics costs. Even more significantly, such a strategy can enable you to go
beyond sourcing to position your organization to leverage your logistics capabilities to sell
and distribute products within those emerging markets.
Key Players in Logistics Arena

49
In addition to the shipping community, categorized as organizations that consume
transportation and distribution services, the logistics market place is dominated by
transportation providers, storage providers and Third Party Logistics Providers.
A growing trend for organizations focused on managing their supply chains is to outsource
part or all of the logistics functions to Third Party Logistics Providers – 3PL’s. By
definition, these are independent companies that design, implement and/or manage a client’s
supply chain logistics needs. The key differentiating factor between a 3PL and a
transportation provider is that a 3PL provider’s primary value-add is based on information
and knowledge, versus providing an undifferentiated service at the lowest costs. In addition
to providing expertise, a key to managing the complexities of a global supply chain with
regulatory and other issues, 3PL providers leverage their infrastructure and freight rate
negotiations over a large base, providing cost advantages. Additionally, for companies
experiencing seasonal demand for their product, outsourcing the logistics function transforms
a fixed cost into a variable cost.
The transportation industry includes water transportation, air transportation, motor freight
and railroads. In an effort to enhance customer service, transportation providers are
upgrading from telephone/fax to information technology. In many cases a combination of
web-enabling technologies are used to receive shipment instructions, track and trace
shipments and compile/post statistical information. Electronic commerce, the Internet and the
World Wide Web are key enablers for IT strategies.
In addition to the networks of storage facilities operated by the shipping and 3PL
community, there are commercial warehouse operators who provide storage facilities for
both dry goods and temperature controlled product. These can be either contract
warehouses, or public warehousing facilities. Contract warehousing provides storage
facilities to a single client, normally under a long-term contract. Services provided could
include additional value added services such as kitting, configuration etc. This is a growth
area, due in large part to the requirements of web-based storefronts. Public warehouses
provide storage for a variety of clients, either on a short term, or seasonal basis, or on a
longer term.
In addition to storage and transportation management these facilities also provide value-
added services as required. Temperature Controlled Warehousing/Frozen Storage facilities
are similar to both public and contract warehouses, the primary difference being that they are
temperature controlled, based on product requirements – refrigerated, frozen etc. This type
of storage is extensively used in the food industry and in response to market demand is
increasing their value-added service offerings. In addition to the traditional warehouse
facilities, there are specialized facilities that offer national parts distribution, or storage and
distribution for products with low velocity or those of a hazardous nature.
Indian Logistics Industry

50
The annual logistics cost in India is estimated to be 14% of the GDP, which translates into
USD 140 billion assuming the GDP of India to be slightly over USD 1 trillion. Out of this
USD 140 billion logistics cost, almost 99% is accounted for by the unorganized sector (such
as owners of less than 5 trucks, affiliated to a broker or a transport company, small
warehouse operators, customs brokers, freight forwarders, etc.), and slightly more than 1%,
i.e. approximately USD 1.5 billion, is contributed by the organized sector. So, one can see
that the logistics industry in India is in a nascent stage. However, the industry is growing at a
fast pace and if India can bring down its logistics cost from 14% to 9% of the GDP (level in
the US), savings to the tune of USD 50 billion will be realized at the current GDP level,
making Indian goods more competitive in the global market. Moreover, growth in the
logistics sector would imply improved service delivery and customer satisfaction leading to
growth of export of Indian goods and potential for creation of job opportunities.
Several problems existing in the Indian logistics industry make it unattractive for investments
and also create entry barriers. Some problems are mentioned here. Logistics is a high-cost,
low-margin business. The problem of organized players is compounded by unfair
competition with unorganized players, who can get away without paying taxes and following
operating norms stipulated in the Motor Vehicles Act such as quality of drivers and vehicles,
volume and weight restrictions, etc. Economies of scale are absent in the Indian logistics
industry. Even the organized sector that contributes slightly more than 1% of the logistics
cost, is highly fragmented. Existence of the differential sales tax structure also brought in
diseconomies of scale. There is lack of trust and awareness among Indian shippers with
regard to outsourcing logistics.
The volume of outsourcing by Indian shippers is presently very low (~ 10%) compared to the
same for the developed countries (> 50%, sometimes as high as 80%). Indian freight
forwarders face stiff competition from multi-national freight forwarders for international
freight movement. MNCs, because of their size and operations in many countries, are able to
offer low freight rates and extend credit for long periods. Indian freight forwarders, on the
other hand, because of their smaller size and lack of access to cheap capital, are not able to
match the same. Service tax levied on logistics service fees (currently 12.36% with
educational cess) may make outsourcing costly and outweigh the possible benefits. There is
lack of skilled and knowledgeable manpower in the logistics sector. Management graduates
do not consider logistics as a prime job.
Changing Logistics Landscape in India
India’s container trade has been growing at around 15 per cent over the past five years. That
means the logistics services business will be growing at a multiple of the box trade, probably
around 20 per cent and more per year. The growth in demand presents significant
opportunities for the logistics industry, as also challenges. India’s current trade profile
provides important clues about the development of logistics industry. In some areas, notably,
apparel exports, there is vital emphasis on logistics and speed to market for the delivery of
time-dependent ‘perishable’ goods. For the bulk of trade into and out of India, it is not the
case; relatively inefficient, individual transport services can be cobbled together to get goods

51
to the market. This will change. As the trade profile changes, so will the need for more
reliable, seamless supply chain solutions that offer real-time visibility along the pipeline.
The key driver of demand for world-class logistics services is a critical mass of MNCs whose
bottomline success requires low-cost manufacturing locations, connected to highly efficient
supply lines. Secondly, some pieces of hardware are either missing or not up to the global
standards. Ports, for example, are for the most part choked up or not set up for increased
container transportation. Road and rail connectivity is patchy and waterways, while exciting,
are not yet big on the radar screen as far as volumes are concerned. Add to that a lack of
capabilities or competition in some segments of the supply chain, absence of common
standards for equipment and technology, and intra-provincial barriers. These are the key
factors playing on the minds of MNCs looking for alternative lower-cost sourcing locations
or wanting to reduce their dependence on China and other Asian countries.
Broadly the elements of integrated supply chain include:
 Supply chain management design
 International ocean/air transportation
 Consolidation/Distribution
 Document Delivery
 Deconsolidation distribution
 Multimodal transportation
 Warehousing
 Delivery to point-of-sale
An effective logistics provider should have the expertise and global connectivity to manage
cargo through an integrated network from the time it leaves the warehouse to delivery at
destination to customer locations and distribution centers. Expertise in freight analysis, audit
and payment, plus service-level reporting is the customer’s weapon in the everyday battle to
move freight more efficiently.
Needfor Integration
There is a vital need for integration so that customers can achieve their transportation
requirements while maximizing the value of money spent in getting their goods to market.
This requires better use of existing assets and industry cooperation, and greater competition.
Companies aiming to be an integrated solutions provider have to tackle this by extending
their supply chain capabilities.
Every point of service along the chain must have the capacity for cargoes to flow through
efficiently—at the lowest cost and greatest velocity—or it will become a bottleneck and has a
cost or time impact on customers. Having bigger ships may ease the shortage of space at sea,
but shift the pressure on to the next point in the chain.

52
The global transportation companies of tomorrow must be able to offer highly integrated and
flexible solutions that take into account the increasing cyclicality and volatility in operations
across industries. This is making companies vulnerable to interruptions in their supply lines.
A weak or weakening US dollar, lack of consumer confidence in the West, surge in world oil
prices, terrorism or geopolitical concerns—these are all very real factors influencing the
design of supply chain solutions in today’s economically connected world. New technologies
such as RFID, standardized data processing formats and new supply chain tools and e-
commerce capabilities will, undoubtedly, open up new ways to mange movement and storage
of goods.
INTERNATIONAL LOGISTICS AND SCM
International logistics is the design and management of a system that controls the forward
and reverse flow of materials, services and information into, through and out of the
international corporation. When shipping a product overseas, the exporter must be aware of
packing, labeling, documentation, and insurance requirements. Most exporters rely on an
international freight forwarder to perform these services because of the multitude of
considerations involved in physically exporting goods.
Freight Forwarder
An international freight forwarder is an agent for the exporter in moving cargo to an overseas
destination. Whether an exporter is large or small, the weight of the cargo light or heavy, a
freight forwarder can take care of cargo from “dock to door,” thus freeing the exporter from
dealing with many logistics-related details.
Schedule B and HS Numbers
The Harmonized System (HS) assigns a 6 digit number to each product that is traded
internationally. Each country can assign, on its own, four additional numbers, making the
entire number 10 digits. The United States does this with its Schedule B system.
Tariffs and Import Fees:
Tariffs or duties are a tax levied by governments on the value of products imported from one
country into another. Before you export to any country, you need to determine what the tariff
rate is on your product(s) as well as any import fees for that country.
Common Export Documents
There are many common export documents that have to accompany export shipments
including the Shipper’s Export Declaration, invoices, packing lists, certificates of origin and
the list goes on.
Through the implementation of international logistics, the firm can implement cost-saving
programs such as just-in-time (JIT), electronic data interchange (EDI), and early supplier
involvement (ESI).

53
The two phases of the movement of materials include: Materials management or the timely
movement of materials, parts, and supplies; Physical distribution or the movement of the
firm’s physical product to its customers.
Important Logistics Issues Surrounding Corporate Management
Recently Japanese companies have actively deployed manufacturing bases overseas. Such
globalization of corporate activities has been supported by IT represented by the Internet and
logistics. The establishment of systems and structures quickly responding to changes by
visualizing worldwide production and inventory through the utilization of IT is crucial in
realizing efficient global supply chains.
The international distribution connecting each function and player of globally conducted
procurement, production, and sales also plays an extremely important role.
There has been a great expectation for the advancement of 3PL (3rd Party Logistics)
businesses as a counterpart of global SCM (Supply Chain Management). In the globalization
of corporate activities, efficient and seamless logistics is necessary and when it is realized, it
would make a huge contribution to corporate competitiveness.
Since logistics is a foundation which supports not only economic activities, but also people’s
lives, the viewpoint of providing safety and ease of mind to consumers is essential.
Therefore, the important issues include: securing of safety by eliminating accidents during
transportation and by strictly complying with proper product handling procedures throughout
distribution processes, and pursuing ease of mind such as with the development of the
product traceability system and/or others. It is necessary to implement a safe and efficient
international distribution mechanism in response to the enhancement of international
security.
COMPARISON BETWEEN DOMESTIC AND INTERNATIONAL LOGISTICS
The national logistics operator serving the indigenous market usually has the advantage of
being aware of the structure of the market, its infrastructure and all its elements, in particular,
regulations, all the costing elements from manufacturer/production to the
distributor/consumer, the supply chain under the national government,, a common language,
a range of economic/industrial indices indicating the changing market trends, taxation levels,
employment law, consumer protection and competitive law. Hence the logistics operator
remains focused on one country, but must be equally conscious of inwards investment
whereby overseas companies penetrate the market with their goods and services.
The international logistics operator in designing the supply chain permeates several countries
and may extend to several thousand miles from Australia/China/India/Malaysia to Europe
and North America and vice versa. It is a distant market and embraces numerous conventions
and complex regulations especially in the area of trade law, international finance, market
entry regulations, customs, taxation, language, transport regulations etc.

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