Logistics Costs and Supply Chain in India

Logistics Costs in India

• India's logistics sector is substantial, valued around $215 billion, and growing at 10.5% annually.
• The sector employs 22 million people, according to the Ministry of Commerce and Industry.
• Logistics costs in India comprise 14% of GDP, similar to other developing nations. In developed countries, 6-7% of GDP is the typical figure.

Indian Supply Chain Breakdown

• Transportation accounts for 40% of total logistics costs.
• Warehousing constitutes 26% of the logistics cost.
• Inventory accounts for 24% of the logistical costs.
• Order processing and administration make up 10% of total logistics costs.

Supply Chain Community

• The supply chain community encompasses raw material supply, manufacturers, distributors, wholesalers, retailers, and end users.

Comparison of Logistics Modes

• Truck: Cost-effective for short distances, quick delivery medium distances, limited by size and weight restrictions, extensive market reach.
• Rail: Cost-effective for large volumes and long distances; comparable speed to truck; great for transporting large volumes at once.
• Water: One of the least expensive modes; slow transit time; extensive coverage, but requires access to waterways.
• Air: Fastest mode for long distances; high carrying capacity; expensive; easily impacted by weather.

Velotrade Terms

• Terms like EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DPU, DAP, and DDP are defined for seller and buyer obligations, and risk transfer in material handling.

Bird's-Eye View of Supply Chain Network

• Key stages/processes include material, transportation, manufacturing, and inventory costs.

Geographical Spread of Inland Logistics Network

• The network is strategicaly located close to mines and ports.
• Goods are delivered within 2 days across pan-India through a network of warehouses and special processing centers (SPCs).

Logistics FG Material Movements and Flows

• Diagram illustrates the material handling processes from origin to destination ports within a structured framework.

Strategic Supply Chain Framework

• Operational Level: Defined supply chain framework, structural decisions, and operating policies, real-time inputs.
• Tactical Level: Defined supply chain framework, time-based facility/product process framework, firm business plan.
• Strategic Level: Corporate strategy, business plan, and investment window.

Cost & Serviceability Relationship

• The relationship between costs and serviceability of goods has an inverse relationship.

Type of Supply Chain Networks

• Direct Supply: A manufacturer delivers the goods directly.
• Cross-Docking: Goods are moved efficiently between delivery points.
• Milk Run: Goods are transported in batches along a fixed route.
• Hub and Spoke: Centered on a central hub for distribution.

Physical Distribution & Satellite units

• Geographical locations of distribution and handling centers.

Types of Supply Chains

• Lean: Eliminates waste; no value-added processes.
• Agile: Responds to changing conditions; increased flexibility.
• Green: Reduces environmental impact; sustainable practices.
• Closed-loop: Includes forward and reverse processes (collection, recycling).
• Sustainable: Combines social and environmental responsibility.
• Risk: Adapts to uncertainties, damage, or economic downturns.

Supply Chain Matrix

• A matrix depicting various customer needs, supply characteristics, and corresponding supply chains (lean, agile, etc.).

Logistics Service Providers (Levels)

• 1PL: Manufacturer delivers goods directly to electronic shop
• 2PL: Courier delivers goods from manufacturer to shop.
• 3PL: 3rd party logistics company; takes over logistics, from manufacturing to end-users
• 4PL: Logistics company manages 3PL for manufacturer, in packaging and delivery
• 5PL: Logistics company manages entire supply chain.