Author: Amit Mitra
Article Dated, 10 Jan 2005
WITH Indian corporate houses increasingly outsourcing their logistics requirements to specialised operators, the domestic logistics market is beginning to attract new logistics services providers, particularly foreign players.
Industry analysts say the time is not far off when corporate houses would be demanding more non-traditional services that go beyond the usual inbound/outbound transportation and Customs clearing and forwarding to spill over to services such as reverse logistics, inventory management, packaging, labelling and even order processing. This is encouraging both foreign and Indian players to broaden the syntax of logistics services.
The latest to join the bandwagon of foreign logistics services providers was Swift, a subsidiary of Swift Freight LLC of UAE, which launched its Indian operations in Mumbai last week.
Rhenus AG, a subsidiary of the $2.4 billion German Major Rethmann Group, is also setting up shop in India, by tying up with Hyderabad-based Seaways Shipping Ltd. The joint venture, Seaways Rhenus Logistics Ltd, will launch its Indian operations in Mumbai on January 27.
While foreign players like APL Logistics, Panalpina and Maersk Logistics have been operating in India for quite some time, a clutch of Indian players, which until recently were providing minimum logistics services, are also planning to broaden their areas of operation.
“We see exciting opportunities in India, as corporates are realising that outsourcing of their logistics requirements to specialised service providers can result in substantial savings,” says Mr Mark D’Souza, Managing Director of Swift.
Each of these players is trying to consolidate their presence in their own core areas of strengths. For example, Swift will be focussing on logistics services covering the Indo-African trade, as the company has a strong presence in the African market. Seaways Rhenus Logistics will similarly be focussing on the Indo-European trade route, covering sectors such as automotive, healthcare, chemicals and consumer goods.
A recent study by Transport Corporation of India Ltd, a major Indian player in the logistics market, and the Management Development Institute (MDI) has shown that the benefits that outsourcing of logistics requirements had brought to corporate houses range from improvement in delivery schedules and reduction in operation cost to enhancement of their geographic reach and improvement in operational flexibility. The study has also shown that less than 55 per cent of the Indian companies subscribe to 3PL (third party logistic) Services, as compared to over 75 per cent globally, meaning that the market will be growing at a brisk pace.
Present trends indicate that the cement sector has reaped the maximum benefits by outsourcing logistics requirements to 3PL service providers, especially as logistics constitute between 10 and 15 per cent of their operating costs. Likewise for the automobile and engineering sectors, logistics account for 5 to 10 per cent of their operations costs, while that for FMCG ranges between 3 and 7 per cent, as it gets the benefit of volumes, analysts point out.
The future trend seems to be towards fourth party logistics (4PL) service providers, which would act as a single interface between the client and multiple logistics services providers so as to manage all the aspects of the supply chain.
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