Container Logistics & Warehousing :
Logistics and warehousing are important part of controlling and managing flow of production goods. It refers not just transportation itself, but... more

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Logistics

Container Lines

'Containerisation', the term very familiar to present day shipping industry was a completely unknown concept a few decades back.

It was Malcom McLean,owner of a huge trucking company in USA, who first conceived the idea of containerisation by transporting containers through 'Ideal - X' in 1956 and initiated a revolution in the history of shipping industry. Over the years, the industry has created a separate identity within the shipping world through continuous development and Maersk Lines, P&O Nedlloyd, Sealand Services (CSX), APL and others have come up as international major serving customers all over the globe.

The growth of containerisation in India has been slow and steady. The formation of Container Corporation of India (CONCOR) as an autonomous body under the Ministry of Railways in 1988 boosted the efforts at increasing containerized traffic in the country. Over the years, volume of container traffic has experienced continuous growth and crossed the 2.0 million mark in last fiscal by registering a volume of 2.22 million TEUs in 1999-2000 at the major ports of India.

A significant number of international container lines are active in India making business through their own office or through selected agents. Amongst the Indian shipping companies, only 'The Shipping Corporation of India' is active in the international liner business. It has tied up with ZIM Navigation of Israel and Yang Ming Line of Taiwan to provide services on international routes.

Of the 12 major ports of the country, Jawaharlal Nehru Port (JNP) and Mumbai Port have established as the gateway ports for container traffic to India having a combined market share of around 60% of the total container traffic. Lack of adequate infrastructure in form of container handling equipment, Container Freight station (CFS) network and rail network in other ports have led to concentration of container traffic at Mumbai and JNP.

However, substantial investments have been made in recent times by private sector in the ports of Tuticorin and Cochin to overcome the backlog. Liberalisation and privatisation policy taken up by the Government has resulted into the commissioning of new ports like Adani and Pipavav. While PSA Corporation of Singapore is active in Tuticorin port, Chennai and Cochin ports are planning to rope in Dubai port authority (formerly P&O Ports) for development and management of their container terminals. International liner major Maesrk-Sealand has acquired Pipavav from PSA and has started container terminal at JNP.

Reviewing the development of liner business since its inception across the world, it has been observed that container shipping would be the most imperative choice for movement of dry cargo in the coming years and liner business is likely to take a crucial role in promoting the prospects of shipping industry. Following the global trend, Indian ports are also geared up to take the role of a hub port by developing necessary infrastructure to attract large size mother vessels. Taking the advantage of long coastline of India, CONCOR is contemplating to start coastal movement of container vessels. Looking at the overall aspect of the industry, it can be concluded that future of container liner business would be bright enough.

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ICD / CFS

Integrated Logistics

The term logistics is defined as "the process of planning, implementing and controlling of the efficient, cost effective flow and storage of raw material, in-process inventory and finished products and related information from the point of origin to the point of consumption as per customer demand".

The entire process involves a large number of activities to be done in accordance with user requirement and requires proper integration of different activities, which would lead to the smooth flow of operations across the value chain. Integrated logistics co-ordinates all the logistical activities taking place in a value chain to provide optimum benefit to the user.

Amongst the international shipping companies, APL is the pioneer to enter into the field of integrated logistics services way back in 1979. Looking at the success of APL concomitant to growing industry demand, other shipping companies follow the suit. Major companies like Maersk, P&O and others have started providing integrated logistics service by extending their service chain through land and air and making an optimal co-ordination of all the services.

The concept of integrated logistics service is new to the context of Indian industry. In India, traditional transport companies, courier companies and freight forwarders have emerged as integrated logistics service provider by leveraging on their existing infrastructure and experience. They not only provide the prime functions like transportation, warehousing, packaging, clearing and forwarding but also handle other activities like order processing, sales tax and excise duty documentation, invoicing, collection of bills, inventory management, and others.

In India, the market for logistics service providers is highly fragmented. While most of the existing players are performing various functions of logistics, providing integrated logistics service for any kind of commodity has become the industry demand. Chennai-based South India Corporation Agency Limited (SICAL) has established itself as the integrated logistics service provider for TNEB by coordinating all the logistical functions involved in the transport of thermal coal from coal rich states of Orissa, Bihar and West Bengal to Chennai through multimodal transport.

With the strategies taken up by traditional industrial firms to reduce operational costs and enhance value addition through out the value chain, importance of integrated logistics has got a new dimension. Outsourcing of logistics service to specialised service provider having considerable expertise over the industry becomes the trend. This has led to a flow of European logistics service providers to India having significant domain knowledge and technology resulting into a high degree of competition in the domestic market. Overall the role of integrated logistics services is expected to increase in the new economy leading to betterment of value chain.

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Transportation

Transportation, an indispensable component of economic progress, is an essential and major sub-function of logistics, creating time and place utility in goods. It serves as the backbone of supply chain management.

Though traditionally, transportation involves physical movement of goods, however, in the new economy era, it is largely influenced by information and communication technologies with the focus being on knowledge of customer needs and value added services in order provide maximum benefits to user.

Globally, transportation sector accounts for around 3 to 5 percent of GDP. The demand for transportation industry is directly proportional to the growth of the economy, mobility of population and other related factors. As per the World Bank's estimate, a unit increase in GNP in India generates an increase of 1.5 times in freight transport demand. The rapid economic growth on the onset of the liberalisation in the last decade has substantially increased the potentiality of transportation in India. To cope with the expected rise in demand, huge investments have been made in the last few years. Opening up of Indian economy has opened the doors for private sector participation; however, the response level is not at par with the expectations.

Estimated increase in the output of the basic industries is likely to create substantial demand for bulk transportation. With the expected annual growth of Indian economy likely to cross 6 percent mark in near future, transportation demand is also likely to rise substantially and estimated to become double in next ten years.

Though traditionally, transportation industry is classified on the basis of the involvement of different modes viz. road, rail, sea, air; here we are concentrating on inland movement, which includes road, rail, inland water and pipeline transportation.

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Warehousing

Traditionally, warehousing involves the storage of raw material, work-in-process inventory or finished goods in a covered space in the most suitable way for a specific time period. It also adds temporal and spatial significance to the value of the commodity. With the growing importance of logistics and supply chain management through out the world, warehousing has emerged as one of the vital component of the supply chain.

Globally, the USD100 billion warehousing industry has undergone significant changes in the last decade owing to the growth in world trade and expansion of international markets as well as increasing application of new technology. Internationally, warehousing industry is classified into three different types viz. Public warehousing, Private warehousing and Contract warehousing. Of these, contract warehousing, which has dedicated customers with long-term agreement, is the fastest growing segment of the industry internationally and is expected to grow at a rate of 12-15 percent over the next couple of years.

In India, warehousing industry is mostly dominated by State Warehousing Corporations and public sector undertakings viz. Central Warehousing Corporation (CWC), Punjab State Warehousing Corporations (CONWARE) and others. CWC, the largest warehouse operator in India, operates across the country through 444 warehouses and provides storage capacity of 7.3 million tons for a wide range of products. Warehousing activities of CWC include food grains warehouses, custom bonded warehouses, container freight stations, inland clearance depots and aircargo complexes.

Ports act as the interface for seaborne trade movement. Most of the major ports of the country provide warehousing facilities to users through its own warehouses and also by privately-owned warehouses located within or outside the port arena. Increased liberalisation of the economy has boosted private sector participation in ports.

Looking at the future of the warehousing industry, it has been observed that technology is likely to play a major role through the increasing applications of Internet. Information technology is likely to play a key role in determining the competitiveness of the industry.

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