Logistics Industry – A Perspective

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Worldwide enterprises (SMEs and Large) are betting increasingly on cross- border trades and are seeking cost-effective solutions. They manufacture in places where the making cost is low and sell in places where the selling price is high. As a result of this, they make huge profits due to high margins.

Apple is an excellent example of this. Apple makes most of its products – laptops, iPhones, IPads at the Foxconn and Pegatron facilities in China and Taiwan. However, the electronic parts, which go inside these products, are sourced from various countries across the globe. The assembly happens on a massive scale at the Chinese and Taiwanese factories and shipped for sale across the world.

China, Vietnam, Philippines, Indonesia, Malaysia, Thailand and others are considered to be low-cost centres for mass manufacturing.

Uninterrupted power supply, expressways, modern railway networks, containerized transportation, large warehouses, well-equipped ports,  speedy customs clearance are all the hallmarks of 21st-century manufacturing.

However, modern-day manufacturing is heavily banking on real-time OR just-in-time logistics, where components arrive at the time of assembly, get assembled and go out as the finished products within the shortest possible time.  Nevertheless, the multimodal goods storage and containerized transhipment form the backbone of Just-in-time logistics, which in itself is a subset of the logistics industry with a turnover running into trillions of dollars.

Outsourced logistics

Organizations don’t want to spend money on building and storing the products in their warehouses; rather they outsource the storage to the third party Multimodal logistic parks (MMLP) operators. A typical MMLP service provider offers the following –

Freight transportation, warehousing, packaging & inventory control, order processing, and marketing, demand forecasting and other value added services.

MMLP is the refined form of Logistics Park where various value added services are rendered in addition to containerised rail/road based transportation. It is now-a-days identified globally as the latest trend in supply management and known by different names in different countries. Government is building MMLP/ ICDs at various strategic locations all along the railway network. This is giving a fillip to the local business and to the economy.

MMLP can handle all kinds of goods (raw, semi-finished, finished) including food products and other value added services mentioned above. Organizations can retain with them core functions such as R&D & product improvements, HR, manufacturing and customer support.  The rest can be outsourced to MMLP/ICD management in the vicinity. This way,  they (organizations) can remain slim and fit, ever-ready to cash-in-on the emerging opportunities.

All products at MMLP are barcoded for easy identification and electronic processing. The goods can be re-packaged by professionals using the latest equipment and transported in barcoded containers through multi-axle goods trains and trucks to the port.

The integrated MMLP complex will have  Inland container depots (ICD) for parking the ready-to-ship containers. These complexes will also have government agencies for speedy security clearance and getting governmental nods for exports, thus making the life of an exporter that much easier. For importers, the complex houses the facility for scanning the imported goods and giving customs clearance.

To put it in simple terms, an MMLP/ ICD offers following benefits

  • Excellent transport links of rail and road
  • Custom clearance facilities
  • Provide round-the-clock services
  • One window services
  • Enhanced security systems
  • Availability of more options to the users
  • Value added services

Europe, the USA, Australia and Far-east Asia have a highly evolved logistics industry. More matured and state-of-the-art the logistics industry is, the less is the cost incurred in the transportation and distribution of goods.

HUB and SPOKE – A Brief Introduction

Hub & Spoke
Hub & Spoke

The Hub

The logistics industry is driven by the HUB & SPOKE mechanism. The HUB is a place that is well connected through rail and road networks to the rest of the region and to major ports. The HUB has in its vicinity various manufacturing companies producing many products. The goods handled by the HUB are not limited to manufactured products, but also includes agricultural,  horticultural, poultry, dairy items etc. sourced and packaged to be exported across the globe. 

The goods are easily transported through barcoded containers to the ports and shipped across the globe.

SPOKEs

For internal consumption, the goods are sent in barcoded containers to SPOKES spread across various regions, to be stored in the warehouses owned by distribution companies. These distribution companies have many stockists in various cities, who will distribute goods to numerous mom-and-pop stores, super retailers, markets etc. From there, the goods will eventually reach consumers through delivery agencies. Transportation, storage and distribution of goods look so professional and clean with the “HUB & SPOKE” concept. Since it is layered, it is easy to track the goods in transit with mobile Apps.

Conclusion

Since the logistics industry in India is at infancy as of now, the HUB & SPOKE mechanism is not fully evolved yet. It is evolved in bits and pieces that too in a few developed regions of India. Because of this, we still see goods transported, stored and distributed in an unorganised way in most places. However, the government is determined to change this at all costs with the introduction of “National logistics policy – 2020″ in which the logistics sector is given an “Industry” status. Through this the government plans to give Banks much required freedom to sanction “long-term-loans” to the logistics companies.

With this, the future of India’s logistics sector looks bright and is going to be a sunrise sector like Information Technology (IT) in the near future.


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