Crude at sub-80 - Golden Days for Logistics ahead ??

In 2008 and 2013 I wrote how how fuel prices will help to consolidate logistics sector. (Read http://visiblesupplychains.blogspot.com/2013/04/fuel-price-rise-is-good-for-logistics.html ).

Here we are at end of 2014 and Crude is at SIX YEAR LOW !! How luckier can Narendra Modi get !!

But what bout logistics industry? Will it be Golden Days ahead? I think yes and this is why:

- Due to the most severe contraction (with a small uptick in 2012) over last six years combined with very high fuel prices, Transporters have mastered the art of saving fuel 

- The fleets have been renewed with main focus on fuel efficiency- most sale of CVs are to replace vehicles rather than add capacity

- The fleets are now bigger in tonnage capacity- same number of vehicles and drivers carrying more tonnage- average long haul truck is now 22 ton and 32-40 ton are common

- Lastly- customers never increased prices much, driving many transporters to bankruptcy or contraction of business.

So- in 2015- when the business cycle actually picks up steam, you will see Transporters commanding better price- marginally- but making very good profits. 

2015 to 2020 will be Golden Years for Indian Logistics. Watch this space !!

SWOT Analysis for Rail Logistics

The domestic cargo container movement is still at a very initial stage in India. The road transport is mainly in the hand of highly unorganized players. Further rising fuel prices and axel load reduction are making road transport uneconomical over a long haul. There is a movement of 30 percent of Exim containers by rail, and the remaining is transported by road. Till 2005 CONCOR was a sole service provider for rail transportation of containers.

Container Rail Logistics – SWOT

Strengths

Indian Railway is the world’s third largest railway network under a single management and covers about 64,015 route kilometers.
The country’s expansive railway network traverses throughout the nation’s frontiers and is the primary mode of transport for passengers, freight, cargo and natural resources such as coal.

A total of 1.7 MTEUs were rail borne, out of which the North contributed 0.71 MTEUs and the West 0.23 MTEUS.

Weakness

This is a highly capital intensive business and the cost of rolling stock is around Rs.13 corers/rail. The cost of operating an inland container depot is around Rs. 100 cores. The entire infrastructure such as yard/containers/ signals is still provided by one service provider namely Indian Railways.

There is a long gestation period and the project may take sometimes up to 10 years to achieve break even. There is high concentration of traffic at selected port/hinterland.

78 % of the total container cargo is handled by west coast ports. 70 % of total traffic at the west coast is handled by a single port, i.e. Jawaharlal Nehru Port Trust (JNPT). 60 % of the traffic of the west coast moves to the northern hinterland, which leads to a heavy congestion along the routes.

Opportunities

With the growth of containerization due to growing GDP, there exists huge potential in the form of a largely virgin market. With the congestion at the existing road linkage ICDs and limited scope for excavation, there is an opportunity for development of competing facilities. There is a potential for running double stacked trains with the lower haulage charges and better utilization of rolling stock and track capacity.

Threats

This industry is highly dependent on external agencies such as Indian Railways, port terminal operators and shipping lines. There are still several unresolved issues on operational matters, such as stability of rakes, service guarantee and dedicated freight corridors. With regards to double stacked operations due to the lack of a developed infrastructure, this may take time to take off in a larger way. There exists fragmentation on volumes due to multiple operations and there is no control on haulage cost.

 

 

Business Intelligence for Competitive Advantage

Using BI tools to view dashboards and KPIs can save valuable time and will also take less time in decision making. It will also reduce the human intervention and dependency. As there is progress in the activity, it will be visible by click of a button.

 

What is BI?

•       Business intelligence (BI) refers to skills, knowledge, technologies, applications and practices used to help a business to acquire a better understanding of the market behavior and business context.

•       Business Intelligence includes both data access and reporting & analytics

•       The purpose of business intelligence is to support better business decision making as it not only does the statistical analysis but also does forecasting, predictive analysis and helps in optimization.

 

What are Analytics?

•       Analytics means extensive use of data, statistical and quantitative analysis, explanatory and predictive models and fact-based management to drive decisions and actions

•       Analytics are subset of Business Intelligence

 

What are the Benefits of BI?

•       It cuts through the clutter of multiple data reports and presents actionable information on one dashboard.

•       It helps to combine various sources of data into one single repository to offer ONE VERSION OF TRUTH

•       It improves productivity of analytics team by cutting down time to gather, clean and process data. With BI, the team can spend maximum time on analysis and arrive at better business decisions

•       BI helps to correlate various business dimensions as compared to linear single dimension MIS reports

•       Graphical and intuitive presentation of facts helps to focus minds on a problem rather than getting lost in mountains of boring numbers



 

Logistics Cost - Concern for Automobile Industry

 

Indian Automobile industry is rapidly growing and is expected to grow by 8% by 2020. There are various factors that affect the growth rate which should be controlled in order to accelerate it.

But in current situation, not only the rising fuel prices have made it difficult to control the logistic cost, but there are various other reasons which contribute to high expenditures on logistics.

One of the major hurdles in curbing this expense is India’s poor infrastructure, which is a known fact to all of us.

Every manufacturing industry faces a challenge in keeping prices low because of huge logistics cost, which is a prime parameter for distribution of their product.

 Below are some of the major challenges faced in logistics by automobile Industry: 

1.      Delay In Delivery- due to slow movement and stoppage at multiple checkpoints

2.      Tedious Documentation Process- due to different rules and permissions required in different states

3.      High Expenditure On Tyre Prices, Toll Taxes And Insurance Cost - due to high inflation rate

4.      Cost Of Security And Tracking Equipment - required for avoiding any damage & loss of high value Automobiles

5.      No Alternate Mode Of Transportation - inland waterways and railways,  lack of proper connectivity from plants to ports

6.      Long Idle Time Of Vehicle – due to the reason that vehicles are not allowed in city area during daytime

Despite of all the challenges faced and limitations encountered in Indian automobile industry, many steps are taken in favour of this industry.

With the introduction of GST, there is hope that most of the problems will addressed.

Completion of road projects like Delhi –Mumbai corridor may give some relief to logistics cost.
 In addition to this, completion of Rail projects like dedicated rail network and 6-corridors for high speed rail transit system is also expected to reduce the burden on roads. The new rail network would link industrial clusters with transportation hubs and logistics centres to reduce costs and ensure the hassle-free transportation of goods. 

With the implementation of above mentioned plans we can expect logistics cost to reduce considerably and accelerate the growth of automobile industry.

Reducing Empty Miles- best way to reduce Carbon Footprint

Here is a very interesting presentation by David Leifsson on how Coca Cola reduced carbon footprint in Iceland.

 

Who should pay for visibility in supply chain?

Everyone agrees that visibility in supply chain helps to reduce overall costs and make supply chains more reliable.

But who will foot the bill?

An auto manufacturer mandates that all vehicles should be fitted with GPS. But who will pay for installation and maintenance of the same? Typically a transport partner is expected to do the job.

But who benefits MOST from this visibility- Transporter, Supplier or Auto Manufacturer? the answer is fairly obvious-- Auto Manufacturer is the biggest beneficiary.

Thus, the principle should be that one who benefits most pays most. In fact, the HUB who attracts goods to itself or distributes from its locations has a much larger stake in visibility.

A dealer is interested in delivery of say 20 cars at a time- but Auto maker needs to track 1000s of cars for delivery. The benefits from knowledge of any delay or issues or actual delivery are much more to Auto Maker than anyone else.

 

Visibility in Supply Chain

In supply Chain “Visibility” means to have knowledge of where is your inventory or assets (Fleet) at any given time.

Providing end-end visibility or real time information to all the stakeholder is one of the most important metric or Key Performance Indicator (KPI) in defining the service level of a logistics provider.

But most of the logistics and SCM player concentrate on capitalizing more on their core competencies of managing end to end to supply chain activities and ignore information flow across the value chain.

The only way to drive better visibility is to invest in technology infrastructure. Logistics and SCM players thus, need to tie up with technology partners who can help them to store, manage, communicate and analyze necessary information.

These technology partners can thus provide 24/7/365 days real time information to all stake holders. Some of the best tools of managing information flow are as follows:

• Online portals to track consignments: This provides  partners to be aware about the status of their shipment and plan their further actions in a better way.
• Auto emails and SMS: Alerts are sent via emails and SMS to inform interested partners about various events .
• Two way SMS: User can send consignment note number and SMS comes with consignment status, it shows GPS location on Google Maps if the vehicle is GPS enabled.
• Send and receive PODs (Proof of Delivery): Sending and receiving PODs is just a matter of second and thus the entire billing process can be carried out in much lesser time as compared to physical transfer of POD.
• GPS Systems: GPS devices help to track current location of the consignment and also predicts its dynamic ETA (Expected Time of Arrival) which again helps stakeholders in better planning
• Android Devices: Android applications to track status of consignments and check location of vehicles on maps will now become the most used tool  to provide supply chain visibility as android devices have now become a part and parcel of almost every individuals life
• CRM Tool: To enhance customer relationship in the best possible way

It’s the era of real-time and accurate information that drives the logistics organizations and is thus a challenge for all stakeholders to exploit the benefit of the information provided by technology partners and augment their bottom lines. Technology partners like WebXpress will thus, make your journey easy.

Visibility in logistics will see more involvement of IT in coming years; no customer wants its consignment to be out of sight at any point of time.