The Hindu Business Line : ‘Time to put logistics Master Plan in place’

The Indian logistics market, which is projected to touch $129 billion in the next decade from the current $42 billion, is badly in need of a logistics Master Plan to sustain the country’s economic growth, says Mr S. Mohan Kumar, Principal, Infrastructure Business Unit of TransCare Logistics India Pvt Ltd.

“It is high time the Ministry of Transport and all service providers worked together to develop a Logistics Vision 2020 for the country” Mr Kumar says, in a study on the potential of the Indian logistics market.

Currently, existing players are driven by function-based logistics services such as storage, transportation and documentation, whilst fully integrated value-added services (such as inventory management, groupage and post- and pre-production processes) are only provided in rare cases, he says.

Driving consolidation

According to him, the demand for full service providers is growing rapidly, and becoming a driver of consolidation in the market.

Indian logistics service providers are driven by family-owned entities.

However, the shortage of funds for growth at the logistics service providers’ level, to ensure all services under one roof, is certain to lead to consolidation in the coming years, he says. According to Mr Kumar, the contract logistics market, which at present has a size of $800 million, is expected to grow at a CAGR of 22-25 per cent per annum over the next 8-10 years.

In the next three years, the warehouse contract logistics market alone would double. The estimated contract warehouse market would reach to $1.5-2 billion while the contract logistics market would touch $7 billion by 2017.

The potential for “groupage”, which is an integral part of the multimodal concept in the western world, is to get a major boost in India in the next 10 years with the road network, especially the National Highway system, being upgraded, and the liberalisation policy in the road sector likely to raise productivity to the level of western standards.

Radical changes

According to the study, the key segment that is going to see radical transformation in the near future would be the multimodal logistics industry, which is expected to reach the size of about $20 billion by 2017.

To achieve this potential target volume, the existing rail terminals should be transformed into logistics centres both for international and domestic cargo.

The immediate targeted Industry verticals should be Retail and Automobile.

“Multi-modal logistics is certain to bring down the logistics cost and time by 20-30 per cent, based on how players are coordinating along the supply chain”, he says, adding that the domestic palletisation movement is the key for logistics efficiency in India and it would revolutionise the domestic containerisation market.

He also underlines the need for connecting key industry cluster zones of the country with well developed logistics parks so as to streamline vehicle movement within these zones without affecting traffic within the city.

Ports should extend their focus from the waterfront to the hinterland, with vertically integrated port-terminal-logistics park to maximise time, assets and cost in the supply chain. Ports and terminals would touch $12-billion market size by 2017 against $2.5 billion in 2007, he says.

According to Mr Kumar, Logistics Vision 2020 should address the following key areas: Palletisation/containerisation in domestic cargo movement;

Installation of a well-defined Hub and Spoke network movement, with Nagpur as a hub;

Creation of a few mega logistics cities/parks across India;

Logistics parks-based vertical terminals (Port and Air Cargo terminals);

Focus on high-value goods movement through multi-mode transport (Rail-Road-Air);

Linkage of short and long haulage through groupage (Road focus) business;

Standardisation of trucks and containers across India;

Exploiting the Indian IT brand at low cost for transparency in the supply chain;

Creation of an Indian Logistics Association for organised service providers.

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