Express Logistics: Gaining Momentum

Nov. 25, 2010 - PRLog -- A no-brainer but very strongly evident – business worldwide supported by logistics efficiencies, have been more successful & has exhibited superior competitive balance sheets, providing consumers better products / services, yet adding value to its investors. A unique combo – globalization coupled with liberalization, has triggered off immense competition & has ensured that both private & public firms to commit themselves to make available the right material in the right condition, at the time & place, at the lowest cost to their customers.
Over the past couple of years, the logistics sector in India has intensified, they say, every dark cloud has a silver lining. When the global slowdown hit business in India, the logistics sector was first to get affected. The small players were the first to feel the pinch, as the margins were under tremendous pressure. Some were forced to close operations, while others sold out to larger logistics players. The flip side is that the circumstantial consolidation had its own benefits, though, like reducing inefficiencies in operations & increasing innovative offerings.
Companies with firm focus on their Vision have not just held its reins, but in the process have actually transformed themselves into being agile, innovative & flexible customer centric organizations to meet the rising demands of their customers across the length & breadth of the country. Secondly, the intensive infrastructure & technology,  aptly complimented by customized solutions targeted at specific needs of the customer also plays a vital role. Even during the downturn, such companies worked hard to pursue their pioneering spirit & winning the trust of their internal & external customers alike & thereby gaining their loyalty.
India: Immense Opportunities for Express Logistics
Unlike, many leading economies, the growth story in India is fuelled by domestic consumption & not by foreign trade. The good news is that the Indian economy expected to register growth rates of 8 – 9 % (FY10-11), while the Indian Express Industry is expected to clock double-digits growths – a strong indicator of the immense potential the logistics industry has in the country.
To-day, the domestic organized Air Express market is pegged at around INR 1500 Crs, which grew at a CAGR of 7 – 8 %, while the Domestic  Organized Ground Express market is pegged at around INR 1700 Crs, which grew at a CAGR of 14 – 15% in the last 5 years. (Source – AT Kearney).
The Indian Express Industry supports industries like pharma, telecommunication, electronics, IT, banking, auto-components, textiles, retail, apparel, gems & jewellery to provide value-added, integrated time-bound, door-2-door delivery of documents, parcels & merchandise goods.
In an environment of intense competiveness, the 3PL LSP plays a vital role for the companies operating in the various industries & concentrate on their core competencies of manufacturing & marketing. With India being recognized as an outsourcing destination, manufacturing sectors like textiles, automobiles & pharma are likely to witness increased activities in the medium to long run. In addition, with the opening up of banking, insurance, telecom & retail sectors, there will be a further boost to the demand for value added express services in India, as these are the major user industries.
Incidentally, the Civil Aviation has been one of the fastest growing arms of India’s transport infrastructure. In the wake of global competitiveness, all major global express players have established their presence in India in this segment. In order to facilitate trade, many express companies & their councils have taken up dedicated space in airports for cargo clearance, as well.
Opportunities in Shortfalls
Due to the various inefficiencies, logistics cost is much higher in India as compared to most developed countries. The logistics industry contributes ~13% to India’s GDP as against ~8% in developed countries. Going by the nationwide inadequacies in infrastructure which have a direct bearing on logistics, the Government current focus is on developing roads & infrastructure, which will help reduce logistics cost.
There is tremendous potential & promise in logistics, which is why it was one of the top five sectors that attracted maximum investments last year, in spite of infrastructure shortfall.
From FY11, iff the GST is introduced for logistics it will be another shot in the arms & can also fast-forward India’s warehousing segment & lead to far-reaching changes in the supply chain models of many companies. GST can help in cutting down multiple taxes which will allow manufacturers to manage distribution centers across India at select strategic locations, rather than spreading their resources thin at multiple locations as they currently do – simply to save on CST. Since GST is a potential enabler to transform the Indian business landscape by replacing all indirect taxes, eliminate exemptions to weed out multiple layer of taxation & follow the principle of destination rather than origin.  
Logistics consolidation will receive a further fillip as FTWZ become operational in India & make their presence felt across different geographies. In fact, GST & FTWZs will break down parochial barriers & make large-scale operations more viable & cost effective.
Gaining Momentum
The Express Industry is all set to reach new heights with advancement of technology, infrastructure & commitment from private players in this sector, the demand for express services is going up every passing year. The opening up of the Indian economy to foreign investments is expected to attract more companies into the country, thereby adding momentum to market growth.
The Government has taken up the issue of e-governance & infrastructure projects seriously & playing its part by drawing up robust plans for developing & upgrading both air & ground, by modernizing airports, developing highways & roads, etc. Continued investment in this project through PPP will provide the much needed direction & sustained development in India. PPP in infrastructural projects & other such areas will accelerate development & propel the express industry to perform better.

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