INTRODUCTION
Logistics industry is estimated to be Rs. 1,50,000 crore industry dominated by unorganized sector. There are various services provided by big and small players but customers are rewarding to those who are efficient with quality services. Relations do have entry benefit, but in absence of product support gets spoiled. Considering these hard facts the players must always ensure the best of their services. In a briskly changing logistics and distribution space the participants have to be equally fast paced and adapt just as quickly.
Logistics is unique; it never stops! Logistics is happening around the globe; twenty four hours of every day. Logistics is concerned with getting products and services where they are needed when they are desired.
Logistics is the management of the flow of goods, information and other resources, including energy and people, between the point of origin and the point of consumption in order to meet the requirements of consumers (frequently, and originally, military organizations). Logistics involves the integration of information, transportation, inventory, warehousing, material-handling, and packaging, and occasionally security. Logistics is a channel of the supply chain which adds the value of time and place utilityof the supply chain which plans, implements and controls the efficient, effective forward and reverse flow
Logistics management is that part warehousing and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer & legal requirements. A professional working in the field of logistics management is called a logistician.
Third-party logistics
Third-party logistics involves the utilization of external organizations to execute logistics activities that have traditionally been performed within an organization itself.[1] According to this definition, third party logistics includes any form of outsourcing of logistics activities previously performed in-house. If, for example, a company with its own transport facilities decides to employ external warehouse specialist, this would be an example of third party logistics.
Business logistics
Logistics as a business concept evolved only in the 1950s. This was mainly due to the increasing complexity of supplying one's business with materials and shipping out products in an increasingly globalized supply chain, calling for experts in the field who are called Supply Chain Logisticians. This can be defined as having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer and is the science of process and incorporates all industry sectors..
In business, logistics may have either internal focus (inbound logistics), or external focus (outbound logistics) covering the flow and storage of materials from point of origin to point of consumption (see supply chain management). The main functions of a qualified logistician include inventory management, purchasing, transportation, warehousing, consultation and the organizing and planning of these activities. Logisticians combine a professional knowledge of each of these functions so that there is a coordination of resources in an organization. There are two fundamentally different forms of logistics. One optimizes a steady flow of material through a network of transport links and storage nodes. The other coordinates a sequence of resources to carry out some project.
Production logistics
The term is used for describing logistic processes within an industry. The purpose of production logistics is to ensure that each machine and workstation is being fed with the right product in the right quantity and quality at the right point in time.
The issue is not the transportation itself, but to streamline and control the flow through the value adding processes and eliminate non-value adding ones. Production logistics can be applied in existing as well as new plants. Manufacturing in an existing plant is a constantly changing process. Machines are exchanged and new ones added, which gives the opportunity to improve the production logistics system accordingly. Production logistics provides the means to achieve customer response and capital efficiency
RELEVANCE OF LOGISTICS
The logistics industry plays a pivotal role in the economic growth of any country. Logistics costs have high impact on operational efficiencies of companies in the manufacturing sector. The competitiveness of the industry is linked to the efficiency with which goods are transported, stored, and distributed. Logistics also plays a key role in the country’s ability to improve its position in international trade. Logistics costs for various nations as a percentage of their Gross Domestic Product (GDP) varies in the range of 9% to 20%.
The additional trends that emerged were the:
Growth of e-commerce
Shift to smaller shipping quantities
Growth of 3rd party logistics services viz 3PL
The logistics manager plays a crucial role in today’s organization, and ought to be involved in strategy formulation. He is a person who is involved in every stage of flow of information and materials from conception to consumption. He is there for best equipped to determine the organization’s capacity to respond the expectation.
ACTIVITIES OF LOGISTICS SERVICE PROVIDERS
TRANSPORTATION Shipping, Forwarding, consolidation, Contract delivery, Freight bill payment / audit, Brokering
WAREHOUSING Storage, Receiving,(Re-) Assembly, Return goods
INVENTORY MANAGEMENT Forecasting, Location analysis, Consulting
ORDER PROCESSING Order entry/fulfillment, Consignee management, Call center
INFORMATION SYSTEMS EDI, Routing/scheduling, Artificial Intelligence, Expert systems, Bar
coding, Web-based connectivity, Tracking and Tracing
VALUE – ADDED ACTIVITIES Design and Recycling of packaging, marking/labeling, billing, call center activities.
Logistics service providers are defined as companies, which perform logistics activities of a customer either completely or only in part. These functions can include traditional activities such as transporting, warehousing, packaging, etc. but also less conventional activities as those related to custom clearance, billing as well as tracking and tracing.
MAJOR PLAYERS IN SHIPPING
THE TOP SHIPPING COMPANIES: -
1. MAERSK SEALAND
2. CONTSHIP
3. SCI
4. AQUARIUS MARITIME
5. AREBEE STAR SHIPPING
6. ZIM AREBEE
7. CMA-CGM S.A
8. APL
9. MSC
Note: Recently MAERSK. acquired P&O NEDLLOYD.
Shipping industry is dominated by unorganized sector. There are so many players in this industry. MAERSK is considered to be the biggest shipping company.
The Indian shipping industry consists of about 616 ships, with a total capacity of 6.62 million tons Gross Registered Tonnage (GRT). Of these, about 258 ships are engaged in overseas trade and the rest ply inland routes. After a period of decline, both tonnage and fleet size have grown recently, with the addition of ships — tugs, survey vessels, towing vessels as well as pilot vessels — belonging to ports and maritime boards. These were added between April 2002 and March 2003. There are about 55 shipping companies in the sector, of which 19 deal exclusively in coastal trade, and 29 are engaged in overseas trade.
INDUSTRIAL ENVIRONMENT
One among the many problems faced by the exporter is the inefficiency from the government. It has been found that there is delay in government approvals and there are lots of government operations to be hurdled. Most of the governmental officials are corrupted and influenced by bribe. An exporter has to face a lot of difficulties, like delay in the approval, cancellation and lagging of documentation procedures etc., if he fails to please the government officials of the concerned department. Political factors also sometimes become a barrier to the trader. Inefficiency of the customs department will lead to delay in smooth flow of consignments to abroad.
License is required for conducting shipping activities.
THREATS
1. A new competitor in home market
2. Price wars with competitors
3. Competitor’s new innovative service.
4. Competitors superior access to channels of distribution.
5. Taxation is introduced on product or service.
6. Deflation
ACTIVITY NATURE
It doesn’t have the ability to stand alone. It acts as an agent between consigner and consignee. Consigner is the person who ships the material or shipper. Consignee is the person who receives the product.
So, the logistic company acts as an “agent” between the other parties.
Logistics service providers are defined as companies, which perform logistics activities of a customer either completely or only in part. These functions can include traditional activities such as transporting, warehousing, packaging, etc.
INDUSTRIAL ATTRACTIVENESS
Attractiveness to this industry is high. Every big business is related with shipping.Job opportunities are also big. Logistic companies were making huge profit till the middle of last year.It is expected to rise as the production and distribution of othr sectors rises.
FLUCTUATIONS IN THE FREIGHT MARKET
Price fixed in course of a confrontation between supply and demand for shipping services have an unstable character. They often fluctuate. Fluctuations in freight rates may take the form of:
a) Sporadic fluctuations
It is also called irregular fluctuations. They short lasting changes of freight rates. Current, sometimes daily, changes in supply and demand for shipping services are the reasons for the fluctuations.
b) Seasonal fluctuations
Such fluctuations lie in the climatic conditions (e.g. freezing of certain ports, harvest season for certain commodities, increased demand in winter etc.)
c) Cyclical Fluctuations
Business cycles (long, medium and short term) can be a cause of fluctuation. Based on the stages of the cycle the freight rates will differ.
d) Fluctuations due to government intervention.
The reasons for this fluctuations may be political (war psychosis, political crises etc.) or of a speculative nature (gaining of extraordinary profits)
Graph from 2005-2010 (ESTIMATED)
It was a good period for industry from 2005 at the starting time of growth. It happened till 2007. At the middle period of 2008 the recession came and it also affected this industry worsely. Experts predict that industry will be back in track by the end of next year
Logistics Managerial Issues
When devising a logistics strategy, managers aim at achieving a suitable compromise between three main objectives: capital reduction, cost reduction and service level improvement.
Capital reduction. The first objective is to reduce as much as possible the level of investment in the logistics system (which depends on owned equipment and inventories).This can be accomplished in a number of ways, for example, by choosing public warehouses instead of privately owned warehouses, and by using common carriers instead of privately owned vehicles. Of course, capital reduction usually comes at the expense of higher operating costs.
Cost reduction. The second objective is to minimize the total cost associated with transportation and storage. For example, one can operate privately owned warehouses and vehicles (provided that sales volume is large enough).
Service level improvement. The level of logistics service greatly influences customer satisfaction which in turn has a major impact on revenues. Thus, improving the logistics service level may increase revenues, especially in markets with homogeneous
Emerging Trends in Logistics
Globalisation: In recent years, several strategic and technological changes have had a marked impact on logistics. Among these, three are worthy of mention: globalization, new information technologies and e-commerce. Globalization. An increasing number of companies operate at the world level in order to take advantage of lower manufacturing costs or cheap raw materials available in some countries. This is sometimes achieved through acquisitions or strategic
alliances with other firms. As a result of globalization, transportation needs have increased. More parts and semi-finished products have to be moved between production sites, and transportation to markets tends to be more complex and costly.
E-commerce. An increasing number of companies make commercial transactions through the internet. It is common to distinguish between business-to-business (B2B) and business-to-consumers (B2C) transactions. The growth of e-commerce parallels that of globalization and information technologies. As a result of e-commerce the volume of goods between producers and retailers should go down while more direct deliveries should be expected between manufacturers and end-users.
Decisions
Strategic decisions. Strategic decisions have long-lasting effects (usually over many years). They include logistics systems design and the acquisition of costly resources (facility location, capacity sizing, plant and warehouse layout, fleet sizing).Because data are often incomplete and imprecise, strategic decisions generally use forecasts based on aggregated data (obtained, for example, by grouping individual products into product families and aggregating individual customers into customer zones).
Tactical decisions. Tactical decisions are made on a medium-term basis (e.g. monthly or quarterly) and include production and distribution planning, as well as resource allocation (storage allocation, order picking strategies, transportation mode selection, consolidation strategy). Tactical decisions often use forecasts based on disaggregated
data.
Operational decisions. Operational decisions are made on a daily basis or in realtime and have a narrow scope. They include warehouse order picking as well as shipment and vehicle dispatching. Operational decisions are customarily based on very detailed data
STRATEGIES FOR THE CHANGING LOGISTICS SCENARIO
Competition and a rapidly changing environment have brought a number of new factors in to play. Changes encompass technology, government policy, product life cycles and manufacturer- retailer relationship. It is vital that the survival of the organization depends largely on its capability to anticipate and prepare for change rather than just react to it. Reactive organizations and proactive organizations are distinguished as tactics and strategy. Many organizations consider logistics as merely the management of activities related to finished goods distribution. This view however take into account the materials management role of logistics which deals with inward flow of raw materials, manufactured parts, packaging material etc. It is the combination of materials management at one end, and the distribution of finished goods at the other, which comprise logistics and logistics management. And complementing this physical flow is the two-way flow of information.
Organizations have now realized that logistics more than just another operational variable. It manages the interrelationship of all the factors which affect the flow of information and goods which begins when the customers decide to place an order and ends when the order is delivered and the payment made. This means that priorities have to be decided and trade-offs made.
The strategic planning calls upon the management to strike a balance between long term goals and short term customer requirements. Three vital components of strategic planning are vision statements (what the organization stands for), aims (directions it wants to go in), and objectives (specific quantified targets). While aims are qualitative aspects, objectives are quantitative. Therefore, it will not suffice to merely state that a company wants to increase its sales. This is an aim and has to be quantified in order to be considered an objective.
After aims and objectives are established, operational plans can be formulated. These plans include procedures for implementation, control and evaluation. Whether plans are a success or a failure depends on the logistics manager.
CONCLUSION
Extreme changes have occurred in logistics management concepts and practices during the past several decades. The primary determinant of the shape and form of future logistical requirements will be the nature of demand that will need to be serviced. The company’s main focus should be on making available all the services to meet the growing demand of the customers.
The globalization of business promises to offer new and unique challenges for the logistical competencies of most firms. Challenges will also increase the environmental aspects of logistics. Firms can fully expect customers.
Making business commitments to alliance partners will expect near perfect logistical performance.
In today’s operational environment, firms that build strong customer and supplier relationships must be committed to operational excellence. The way of earning profit should be in terms of customer satisfaction and also undertakes surveys on regular basis to improve their performance.
Logistical systems of the future will face complex and challenging performance requirements. Even more so-than today, logistics will be required to support multiple-product distribution to globally dispersed heterogeneous markets through a variety of channels.
The most serious challenge facing managers will be the continued need to shift fundamental practice from a functional to a process orientation. Despite the fact that this challenge has existed for the last half of the 20th century, real change has almost been non-existent in some firms.
While high level performance is important, it must be subordinate to the achievements of overall logistical integration. Simply stated, a function is excellent only when it makes maximum contribution to the attainment of overall operational goals.
To conclude, in many ways, logistical requirements are really demanding and capable of becoming more challenging. The reality is that a great deal of work remains to make the full potential of the logistics in achieving operational excellence.
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