The report covers various aspects about the express logistics market like various companies involved in the business of express logistics, organized and unrecognized companies, market share, growth rate and also the future trends in the express logistics Industry. The findings helped me to understand the various drives which helped the logistics industry to attain success and earn handsome profits. Contents An Overview : The Logistics Industry Logistics Is the function responsible for all aspects of the movement and storage of materials on their Journey from original suppliers through to final customers. Org the total supply-chain. A rule of thumb says that logistics accounts for 10-20% of gross domestic product (GAP) Indian Logistics Industry – Overview The current size of the Indian Logistics Industry is estimated around $Bonn and is expected to reach around $Bonn by 201 5 Generated employment for 45 million people The industry is expected to grow annually at the rate of 15- 20 per cent, reaching revenues of approximately $ Bonn by 2015.
Highly Unrecognized with organized sector responsible only for 6% Market share of organized logistics players is also expected to double to approximately 12 per cent by 201 5 As per industry estimates as provided by the Fitch Rating Agency, there is a positive future outlook for the Indian Logistics Industry and it is estimated that the industry will grow at 15-20% over the next few years.
The Logistics industry includes five broad segments – ocean freight, rail freight, air freight, trucking and third party Logistics (PL) services 70% of the total domestic product is transported through the road network and 15% through the rail network As per industry estimates as provided by the Fitch Rating Agency, there is a positive true outlook for the Indian Logistics Industry and it is estimated that the industry will grow at 15-20% over the next few years Several factors helped the growth of logistics industry in India over the last decade that include changing tax system as well as a rapid growth in industries such as automobile, pharmaceuticals, FMC and retail Major Organized Players in the Logistics Segment in India Blue Dart Express Limited DEL Faded TNT UPS FALL DDCD First Flight Couriers TIC Express Gait IVR Trends in the Indian Logistics Industry Third Party Logistics (PL): Outsourcing is everywhere. Logistics industry is no exception. Logistics services like transportation, warehousing, cross docking, Inventory management, packaging and freight forwarding all are part of third party logistic services. Companies in India currently outsource an estimated of 52% of can be categorized into three major segments – Public sector, Private sector and Foreign entrants.
Some of the major players in each category are: TV’S logistics, DIESEL (DATA), Paneling, TIC, Gait, Allegro, V Trans, Total, IVR and Reliance etc. Private Participation: The industry is becoming more competent with the entry of lobar giants like Gazelle Brinkmen (Wall-Mart’s logistics partner), CHI Robinson and Kerry logistics and large Indian corporate houses like Data, Reliance and Birth group. A series of mergers and acquisition like DEL acquired Blue Dart, TNT acquired Speeding Express Cargo Service and Faded bought over Peace, are also leading to consolidation industry at various levels and segments. Many of these companies are planning to broaden their areas of operation and are also planning to develop their own logistic parks across the country.
Express logistics: Organized players have monopoly over the express logistics industry. 5% of express business is in the hands of organized players, while semi- organized and unrestrained players accounts for 25% and the remaining 10% of the market by MS Speed Post. But altogether different picture can be witnessed in the domestic segment. In domestic front, unrestrained players hold 41% of the market share based on price advantage. While organized players accounts for 45% and MS Speed Post the remaining 14%. Key players in express cargo are: DEL, Faded, TNT, ups, FALL, DDCD, First Flight couriers, TIC Express, Gait and IVR etc. Warehouses: Recently, warehouses have become key growth drivers in the logistics industry.
Apart from conventional storing services, warehouses now providing value- added services like consolidation and breaking up of cargo, packaging, labeling, bar coding and reverse logistics etc. Warehousing and related activities account for proxy. 20% of the total logistics industry. Most of the warehousing space in India lies with unrestrained players in domestic front, which is causing wide supply and demand gap in storage space. Logistic parks: Majority of these logistics parks are planned in close proximity to state capitals. However, availability of large land parcels at relatively low cost, connectivity o multiple markets across states and industrial clusters has led to the emergence of some tier-2 and tier-3 cities as favored destinations for the development of logistics parks and warehouses.
Logistics cost in India The logistics cost in India – which includes inventory holding, transportation, warehousing, packaging, losses and related administration costs – is estimated at approximately 13 per cent of GAP and is high when compared to the corresponding fugues for major economies. Indian’s multi-layered tax regime, infrastructure bottlenecks and other inefficiencies have been the primary reasons in keeping Elements of Logistics cost ; Transportation 35% ; Inventories 25% ; Losses 14% ; Packaging 11% ; Handling and Warehousing 9% FAD regulations for Logistics in India In general 100% FAD under the automatic route is permitted for all logistic services FAD up to 100% subject to FIB approval is permitted for courier services.
FAD up to 49% under the automatic route is permitted for air transport services, including air cargo services. 100% FAD is permitted in Ports and Harbors under automatic route 100% FAD is permitted under the automatic route for storage and warehousing including warehousing of agricultural products with cold storage. 100% FAD is permitted in transport and transport support services through automatic route Future trends in logistics Technological change : It will be achieved through a concerted drive from companies, financial institutions and governments. Given the higher price tag attached to new technologies, mutual support and long-term planning by all key players is essential.
For cross-border movement of goods, express delivery services include handling of custom clearances and payment of relevant duties as well. One-stop solution: Express delivery services act as a one-stop solution for handling all logistics related requirements of the customers. Given the integrated nature of service, the customer needs to deal with only one operator in the entire value chain of service. – Time bound service: Time bound delivery is the most critical aspect of the express industry. The delivery timeliness ranges from 24 hours to 72 hours for most destinations, In addition to the day definite delivery, express industry also provides time definite delivery services. Tracking and Delivery confirmation: Express delivery revives provides real time tracking of shipments to enable visibility to the customer on the movement of goods and provides delivery confirmation for the shipments. Global reach: Express delivery services links to a large number of destinations across regions providing global reach to its customers. – Premium pricing: Express delivery services is the premium segment of the logistics industry and is priced at a premium compared to the traditional delivery services given the time-bound nature of services. Competition within the Express Industry There are a large number of players in the express industry
The total number of players is estimated at about 2500 across the country The presence of a large number of players leads to a high level of competition within the industry The smaller players, due to limited networks, tend to operate in a specific region like intra-city market, state-level market or specific routes The competition level in this segment is the highest as multiple players cater to this segment, and the service differentiation is limited, leading to pricing becoming the major element of competition The larger players, with wider network and better systems, are able to offer wider range of services as well better reliability of services In addition, there are the large global players who have a wide global network There exist a large number of medium-sized players with focus on regional markets but presence across multiple regions These players have differentiated presence in their focus markets Though they have better pricing power than smaller players, price remains a major competition element for this segment as well Overall, the level of competition in the Indian express industry is at a high level with the larger players enjoying a nominative advantage over the rest of the industry Express logistics companies pose serious threat to non-document, hard freight business. Express logistics entities like Gait, UPS, Label, Expresses, Airfreight, Faded etc. Are among the others who provide customer-friendly and value-added services in the express segments. This has squeezed the profits of the truck operators. Compared to truck transporters, these ‘express’ service providers offer more value- added services like time-bound assured delivery of goods, door-to-door services, effective use of technology and professional approach in handling clients.
However, to recapture the lost market share from express-logistic companies, a section of domestic trucks-transporters have set to expand their business towards express logistic business. Accordingly, they too have begun changing names of their old identities and claim to provide facilities which professional companies are currently providing. Over the last two years, among the others who have changed the focus from mere trucking operations to express service and logistics providers are, V- express from Visa Transport, XP from Transport Corporation of India (TIC), and Speeding from Associated Roads Carriers. Etc and others in pipeline to switch-over for express business. Customers now go for cost cutting and transporters are the first target for them.
Besides manufacturing, corporate clients now want increasingly, low inventory levels to manage their production and supply cycles. In this, transporters have a big role to play, as goods will have to be delivered in time. Earlier a day of delivery had to be assured, but these days one has to be specific on delivery time as well. Multinational express and logistics companies like Faded and others, too eave begun looking at option to tie-up with these truckers who have shifted their focus for express business, in big way to capture the vast potential of the Indian markets. Mergers or Organic Growth Mergers drive rapid expansion among the world’s largest logistics service providers, but organic growth is what produces financial success.
Acquisitions have taken on a new momentum in the past year, not only because large pals are strategically buying other pals, but also because the investment world has discovered them. Financial companies which are providers of private capital have dramatically increased the mount of money available to invest in third-party logistics. There are many more buyers than sellers. As a result, prices and multiples keep increasing well beyond what has been normal. Companies often invest without taking majority ownership. They will take a minority interest in a PL with a five-year deal. Unprecedented organic growth of third-party logistics reveals only part of the story.
Not only is the industry growing at a rapid rate, it is becoming more sophisticated and more concentrated at the top. Merger and acquisitions activity among the world’s leading pals in 2004 amounted to $ban. This activity in the PL industry has been gaining $14. Ban. We can expect the pace to stay hot for two to three more years. While the PL industry is a magnet for M activity, a more important question for the customers of these emerging giants becomes, is bigger better? Do global reach, expanded IT capabilities and standardized processes provide the best solutions for customers? Is controlled organic growth better than mega-deals? Do individual customers loose clout with mega-pals? Is controlled organic growth better than mega-deals?
The answers to these questions are very subjective and both, acquisitions and organic growth, have their own benefits and drawbacks. Global Performance of Indian Express Logistics Companies Faded Express, a subsidiary of Faded Corp.. (NYSE: FAD), and the world’s largest express transportation company, has been recognized as Indian’s Best International Logistics Provider in Frost & Sullivan 2011 Voice of the Customer Awards in India. The award was given to Faded for its excellence in international logistics services and for overall best performance in this segment across key industry sectors, as rated by end users. This award highlights Faded excellence as an international egoistic provider to the Indian market.
DEL, the world’s leading international express services provider, has won the ‘Best Express Logistics Provider’ award at the Asian Manufacturing Awards (AMA). DEL Express Asia Pacific received this honor at the second AMA Gala Dinner and Awards Ceremony held at the Pan Pacific Hotel, Singapore on 29 August 2013. Emerging trends in the Indian logistics space and shift towards organized logistics The Indian logistics space is 90% commanded by the unrecognized segment. Over the past few years, this sector is experiencing a shift towards the organized segment. It is tensing the emergence of new concepts in automated warehousing, third party logistics, express cargo and logistics parks.
The industrial warehousing is expected to be driven by rising domestic and export-import freight volumes, investments in infrastructure, organized retail, focus towards manufacturing and the anticipated implementation of goods and services tax. Additionally, other aspects such as third party logistics and logistics parks are also gaining significance in the Indian logistics space thereby promising relatively lower costs and smoother connectivity to multiple markets, going forward. Growing investments in infrastructure and rising attention towards logistics The Indian logistics sector which is said to have a market size of nearly USED 225 ban, has been growing at 15-20%.
According to various agencies, it is expected to grow at proxy. 15%, once the cape cycle revives. However, the cost of logistics in the country currently stands at roughly 13% of GAP as compared to the usual 8-9% that prevails in the developed economies. The total consumption expenditure is expected to Jump three-folds to $3,600 ban by 2020 largely driven by food, housing and consumer durables. The factors including shift from unrecognized exports and imports, planned expenditure towards infrastructure and rising demand for cost-efficiencies and effective operations by the corporate promises for a consistent evolution of the Indian logistics space.
Outlook for Logistics Sector Stable: India Ratings India Ratings has kept the outlook stable for the logistics sector for the next fiscal as it expects a moderate growth for the industry despite the slowdown in the economy. India Ratings & Research has assigned a stable outlook to the logistics sector for IFFY. This is based on the strong likelihood of the sector continuing to display overall iterate growth rate despite a continued economic slowdown, said the Fitch group credit rating agency. The value-added offerings of large players help support margins, thereby cushioning their credit profiles, it said, adding that most of the logistics companies rated by the agency are also on a stable rating outlook.
Revenue for companies offering value-added road freight services would grow at a higher rate of 12-15 per cent during the 2014-15 fiscal than those offering basic road freight services (8-10 per cent). The small companies would continue to be adversely impacted due to low demand for road freight during the slowdown. Inadequate cash flows may force few companies to opt for corporate debt restructuring. Conclusion There is huge scope in logistics sector for organized players. The Indian logistics space is majority occupied by the unrecognized segment Over the past few years, this sector is experiencing a shift towards the organized segment. It is witnessing the emergence of new concepts in automated warehousing, third party logistics, express cargo and logistics park.
