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Distribution channels of Gati in retail segment: Scope and means for
promotion and branding
By
Haresh L
PGDM 2009-11
BIMTECH
Under the Guidance of
Industrial Guide Faculty GuideMr. Arindam Sen Gupta Mr. A K Dey
Manager, Retail Sales Professor, Operations & SCM
Gati Ltd, Kolkata BIMTECH
Greater Noida
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27 May 2010
Acknowledgement
Before leaving for Kolkata from my college in Greater Noida, I was very apprehensive as
to how I am going to spend my two months in a city to which Ive never been to, where
people speak the language I dont understand. But here I am after my first stint in the
corporate world to do a two-month summer internship to thank all those wonderful
people who helped me to learn a lot in this brief period. In these two months I got the
essence of why this internship is called summer internship.
I take this opportunity to thank Mr. Arindam Sen Gupta, EDC Head Sales, Gati Ltd,
Kolkata who helped me understand the intricacies of logistics industry and guided me
through the project. Thanks to my faculty guide Prof. A K Dey who has always been
there to engage in a discussion and clarify my doubts.
I sincerely thank all those people at Gati Ltd, Kolkata from both Service and Marketing
departments who helped me understand the operations involved in providing complex
logistics service, particularly Miss Niharika Mohapatra, Mr. Raja Biswas, Mr. Jagannath
Nag and Mr. Dinesh Sharma.
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Contents
S. No Chapter Page
1. Acknowledgement 2
2. Executive Summary 4
3. Introduction 6
4. Logistics 8
5. Supply Chain Management 9
6. Global Logistics Industry 11
7. 3PL 13
8. Indian Logistics Industry 16
9. Challenges faced by Indian Logistics Companies 18
10. Opportunities for Logistics Industry 19
11. Key Drivers of Growth 21
12. Key Players 21
13. Gati Ltd 22
14. Company Capabilities 26
15. Products/ services of Gati 26
16. Evolution of Business mix 28
17. Competitors 30
18. Distribution Channels of Gati 31
19. Elements of Distribution Network 34
20. Channel Design 35
21. Analysis and results of survey of Kiosks of Gati and competitors 36
22. Conclusion and Recommendations 40
23. Limitations 41
24. References 42
25. Appendix A: Questionnaire 43
26. Appendix B: Channel margins 45
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Executive Summary
Indian logistics industry is going through a transformation. With an expanding economy,
rising GDP and rising income levels of consumers there is an explosion of demand for
logistics services. The proposed Goods and Services Tax (GST) to be introduced from
next year, higher levels of FDI inflows and a greater expansion of domestic companies in
the coming years will lead to an unprecedented growth in demand for logistics services
from these companies to streamline their operations and supply chains.
With the entry of big foreign players like FedEx, UPS, DHL and TNT there will be a
consolidation in the market in the market in the form of Mergers and Acquisitions and
joint ventures. With the rise in demand for specialized and reliable logistics there will be
an increase in the market share of organized players who have scale and systems in place
to offer these services efficiently. Setting up of Free Trade and Warehousing Zones
(FTWZs), expansion of transportation infrastructure viz. road, rail, seaports and airports
will lead to greater efficiencies in logistics in the country.
Gati Ltd is a pioneer in Express Distribution and Supply Chain Solutions in India. It is inservice industry providing specialized and complex logistics services to customers from
different industry verticals. The objective of this report is to study the different
distribution channels of Gati in retail segment and identify the scope for promotion,
branding and expansion of the current distribution network.
The methodology followed to meet this objective is to study and understand the Indian
logistics industry by studying the industry trends and other aspects from several industry
related publications, business and operations of Gati by studying the company annual
reports and newsletters, internal operations and discussions with its employees and
associates. This is followed by a study of its distribution channels and that of its
competitors to identify areas of improvement.
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A survey Gati kiosks and that of competitors has been conducted to study the services
offered at these outlets, functions performed by them, their engagement with the
company and identify the current modes of promotion at their locality.
The results of the survey show that where as Gati is the preferred player for cargo
services with little competition from other organized players but in courier services it lags
due to severe competition, less number of outlets, and lack of promotion to make it a well
known name and preferred player for this service.
The company should increase its visibility by establishing more outlets at prime locations
and promoting aggressively through sales force, sign boards and advertisements.
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Introduction
The Problem:
According to Stern and El Ansary (1992), distribution channels are sets of interdependent
organizations involved in the process of making a product or service available for
consumption.
Gati Ltd is an Express Distribution and Supply Chain Solutions company providing
logistics solutions to its customers. Gati has a multi modal distribution network to reach
its customers. The different distribution channels are namely 1. Sales Force, 2. Gati
Associates, 3. Kiosks, 4. Website and 5. Customer Care centre.
The company broadly has two types of customers depending on the nature of their
transactions with the company. They are Retail customers and Credit customers. Retail
customers are those who do single or irregular transactions with the company. These
customers deal in cash basis. There are other type of customers who are contractual
customers and provide regular business to the company. These customers are extended a
period of credit and provided the service according to the agreement.
The objectives of this report is
To study the current distribution channels of Gati Ltd in retail segment
To identify the competitors of the company in retail segment and its outlets
To study the distribution channels of competitors
To identify the modes of promotion for the company and its outlets
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The Approach:
The methodology followed to meet these objectives is to study and understand the Indian
logistics industry by studying the industry trends and other aspects from several industry
related publications, business and operations of Gati by studying the company annual
reports and newsletters, internal operations and discussions with its employees and
associates. This is followed by a study of its distribution channels and that of its
competitors to identify areas of improvement.
A survey Gati kiosks and that of competitors has been conducted to study the services
offered at these outlets, functions performed by them, their engagement with the
company and identify the current modes of promotion at their locality.
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Transportation
Ever since the invention of wheel by mankind, there has been a revolution in the way
people travel, work and live. We have come a long way since then and there were many
technological developments, which made transportation convenient, comfortable and
affordable.
Transportation has converged the globe; it has brought people together, accelerated and
globalised trade and commerce. Transport ortransportation is the movement of people
and goods from one location to another. It might seem to be a very simple task just
move a mass from one place to another. But unfortunately it is not so. Just as I am writing
this 130 flights of the Indian national carrier Air India were cancelled due to an employeeunion strike with customers straddled at several airports across the country for hours.
Several airlines across the world went bankrupt. Transportation is a very complex process
which involves effective management to carry out the entire process smoothly.
Transportation is the back bone of any economy. Though developments in the field of
Information Technology have significantly reduced the need for physical movement,
transportation still plays a major role in the movement of goods and people. Modes of
transport include air, rail, road, water, cable, pipeline, and space. The field can be divided
into infrastructure, vehicles, and operations.
Logistics
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. Logistics is a part of supply chain
management (SCM).
The word logistics was first claimed to have been associated with the military in 1905
as a branch of war that pertains to the movement and the supply for armies.
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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 utility.
Range of Logistics Services
Supply Chain Management (SCM)
A supply chain is a set of organizations directly linked by one or more of the upstream
and downstream flows of products, services, finances, and information from a source to a
customer. Managing a supply chain is 'supply chain management'. In literature, logistics
and SCM are often used interchangeably, though there is a subtle difference between the
two. While SCM is more strategic in nature, logistics is more operations-oriented.
Supply Chain Management is the systemic, strategic coordination of the traditional
business functions and the tactics across these business functions within a particular
company and across businesses within the supply chain, for the purposes of improving
the long-term performance of the individual companies and the supply chain as a whole.
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The evolution of logistics and SCM in the 1990s can be traced back to physical
distribution management in the 1970s when there was no coordination among the
various functions of an organization, and each was committed to attain its own goal. This
myopic approach then transformed into integrated logistic management in the 1980s
that called for the integration of various functions to achieve a system-wide objective.
SCM further widens this scope by including the suppliers and customers into the
organizational fold, and coordinating the flow of materials and information from the
procurement of raw materials to the consumption of finished goods.
The objectives of SCM are to eliminate redundancies, and reduce cycle time and
inventory so as to provide better customer service at lower cost. The focus has shifted
from the share of the market paradigm to the share of the customer paradigm,
wherein the goal is to create customer value leading to increased corporate
profitability, shareholder value, and sustained competitive advantage in the long run. The
successive stages of evolution of logistics and SCM, the central characteristics of each
stage, and the drivers of change are shown below.
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Global logistics industry:
Currently the annual logistics cost of the world is about USD 3.5 trillion. For any
country, the annual logistics cost varies between 9% and 20% of the GDP, the figure for
the US being about 9%.
The logistics industry is a very competitive one with a large number of international
players having presence in many countries. The service providers have a number of
issues to address, such as pricing pressures, high costs of operations and low returns on
investments, hiring and retaining talent, and pressure from clients to broaden the range of
service offerings and internationalize operations, demand for customized solutions and
more value-added services, besides infrastructure bottlenecks and government
regulations.
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The service providers have to continuously upgrade their networks and systems and equip
themselves with the latest technologies to carry out their complex operations and provide
the best logistics services to their customers. This involves huge capital expenditure and
an ongoing maintenance costs. Logistics companies the world over are increasingly
investing in technologies like Warehouse Management System (WMS), Enterprise
Resources Planning (ERP), Global Positioning System (GPS) and Radio Frequency
Identification (RFID) to provide the best logistics services increasing transparency and
efficiency of supply chains of their customers.
Globalization, consolidation, technology advancements and outsourcing have led to
growth in the logistics services market. The capabilities of logistics service providers are
growing along with the changing expectations of their clients. As the logistics services
industry evolves, competitors are moving away from asset-based commoditized services
to more strategic, information-based approaches.
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3PL
Third-party logistics (3PL) refers to outsourcing transportation, warehousing and other
logistics related activities to a 3PL service provider that were originally performed in-
house.
Third-party logistics (3PL) or logistics outsourcing is gaining importance as more and
more corporations across the world, unable to manage their complex supply chains, are
outsourcing logistics activities to the 3PL or logistics service providers. Globalisation has
led to rapid rise in the need for outsourcing logistics by companies looking for readymade
distribution channels to an entity with local expertise. Also the process of global sourcing
by companies and supply chains increasingly becoming global and complex has given
impetus to the growth of 3PL services.
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By outsourcing logistics activities, corporations are able to not only concentrate on their
core business operations, but also achieve cost-efficiency and improve delivery
performance and customer satisfaction.
Further evolving from outsourcing logistics to 3PL service providers companies are
moving towards 4PL and 5PL service providers to improve their logistics with minimum
investments and in a cost effective manner. This process of evolution helps companies to
build efficient supply chains, reach all the potential customers and achieve customer
satisfaction leading to improved business performance impacting both revenue and profit
growth.
System dynamics of a 3PL provider
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Indian Logistics Industry
Background
The logistics sector in India has evolved over the past two decades from being a pure
transportation / warehousing functional service to provision of more value added
offerings like customs clearance, domestic / international freight forwarding, cross-
docking, reverse logistics, freight consolidation, warehousing of modern standards etc.
India with a GDP of about Rs 31,297 billion is estimated to spend 13 per cent of its GDP
on logistics creating an industry size of around Rs. 4,068 billion (approx. Rs 4 lakh
crores). The industry generates employment to 4.5 crore people in the country. The sector
has been witnessing double-digit y-o-y growth rate since 2002 and is expected to be more
than USD 120 billion (approx Rs.5.4 lakh crores) by 2015.
India ranked 47th in the World Banks 2010 Logistics Performance Index (LPI) out of 115
countries that were assessed for their efficient logistics systems with a score of 3.12 out
of a possible 5.
While there has been a growing recognition in India of logistics as a strategic tool for
enterprise cost reduction and improvement of organizational efficiency on the flip side
however, the logistics sector is characterized by dominance of a disorganized market.
Transporters with fleets smaller than five trucks account for over two-thirds of the total
trucks owned and operated in India and make up 80% of revenues. The freight-
forwarding segment is also represented by thousands of small customs brokers and
clearing & forwarding agents, who cater to local cargo requirements. In order to reduce
logistics costs and focus on core competencies, Indian companies across verticals are
now increasingly seeking and using the services of third-party logistics service providers.
Traditionally LSPs (Logistics Service Providers) concentrated mainly on transportation
and logistics as they form a major share in logistics. However, in order to keep up with
rising demands and customer expectations, companies now also concentrate on value
added services like packaging, custom clearance, inventory management and labeling.
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The major elements of logistics costs for Indian Industries include transportation,
warehousing, inventory management and other value added services such as packaging.
The figure on the right shows that transportation and inventories account for 35 % and 25
% of logistics cost respectively, indicating their importance in logistics.
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Challenges faced by Indian logistics sector
These are among the supply chain challenges outside companies can expect as they enter
the India market:
Limited physical infrastructure. In India the national highways account for less
than 2 percent of the total road network, but carry 40 percent of the traffic. This is
one reason the average speed in India is 20 miles per hour, compared to the
Wests 60 miles per hour. The poor condition of roads translates directly to
shorter vehicle lifespan, which increases operating costs and reduces efficiency.
Off the highways, firms can only run trucks smaller than 20 feet. As of now, India
invests less than 4 percent of its GDP in infrastructure, compared to Chinas 9
percent.
Over-burdened ports. India has a long coastline, but its port system isnt well
utilized. Seventy percent of the seaborne trade is handled by 2 of its 12 major
ports, while 180 minor ports go virtually unutilized. As a result, turnaround time
far lags other global ports with vessels taking up to 3 days to debark. Many of
the secondary ports have infrastructure problems that arent a quick fix. Even
within its large ports, India cant support 6,000 TEU containerships, which make
up 25 percent of todays shipping volume. In addition to constraining Indias
growth in offshore production, this makes it difficult for manufacturers hoping to
import, rather than produce products for Indian consumers.
Non-existent warehouse standards. There is virtually no complex distribution
center set-up, no standards for suppliers, and little vendor compliance. Beyond
that, firms will find there is little vacant DC space available. Firms entering the
country will have to build this infrastructure, which will include supplying their
own electricity, running water, and road access.
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Disorganized trucking operations. Two-thirds of fleets have less than five
vehicles, making it difficult for shippers to manage the plethora of carriers
required to handle shipment volumes. Freight consolidators and brokers take a
commission to provide truck owners with consignments, and corruption is
rampant. Also, inadequate infrastructure causes equipment maintenance costs to
be abnormally high. These increasing costs and dwindling profits leave little
opportunity for small fleet owners to expand.
Multiple tax structures at entry points of different states. Multiple tax rates at
different states, octroi and different documentation requirements at the entry
checkpoints of different states consumes time and increases complexity of trade
between states. This acts a big blockade for movement of goods between states.
Opportunities:
The Indian economy at USD 1.2 trillion and growing at the rate of 7.5% offers
huge potential for the growth of logistics sector which is valued currently at USD
156 billion and expected to witness double digit growth in the coming years.
The phasing out of VAT and introduction of Goods and Services Tax (GST) will
remove multiple tax structures in different states and hence accelerate the
interstate movement of goods.
The investment in infrastructure projects like upgradation and setting up of
seaports and airports at several locations across the country, the Golden
Quadrilateral project and dedicated rail freight corridor will improve transport
infrastructure in the country, reduce logistics costs and lead times.
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The setting up Free Trade and Warehousing Zones (FTWZs) on the lines of SEZs
will increase investments in the sector and logistics infrastructure in the country.
The 3PL market in India is least developed and highly fragmented. However,
there is an immense potential for growth of 3PL in India, about 20% per annum
with companies increasingly outsourcing their logistics to focus on core activities
and achieve cost efficiencies.
The new mass-merchant-style organized retailing, which today makes up less than
4 percent of the overall market, is expected to grow to $60 billion and increase the
overall retail market by a compound annual growth rate (CAGR) of 21.8 percent
by 2015.
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Key Players
Indian logistics industry is a highly fragmented one with 99% of the market catered by
many small unorganized players and most of the remaining 1% catered by a large number
of organized players. So, one can see that the logistics industry in India is in a nascent
stage.
There are a large number of organized logistics service providers (LSPs) operating in
India operating in several modes viz road, rail, air and sea. Over the year each player has
developed competence in one or multiple modes, but none have achieved economies of
scale to operate cost effectively due to severe competition from unorganized players.
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Sales of some key players in Indian logistics industry (in crores)
0
200
400
600
800
10001200
1400
Aegis Gati Blue
Dart
Sical TCI XPS Safex
2006-07
2007-08
2008-09
Sales growth over the previous year (in %)
-20
-10
0
10
20
30
40
50
60
70
Aegis Gati Blue Dart Sical TCI XPS Safex
2008
2009
As can be seen above all the logistics companies have seen a decline in their sales growth
rates due to global recession followed by a slowdown in the domestic economy. Similarly
the net profits of these companies were impacted.
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PAT of some key players in Indian logistics industry (in crores)
-20
0
20
40
60
80
100
Aegis Gati Blue Dart Sical TCI
2006-07
2007-08
2008-09
Change in PAT over previous year (in %)
-200
-150
-100
-50
0
50
100
Aegis Gati Blue Dart Sical TCI 2008
2009
Though the industry was impacted by a slowdown in the last fiscal, it is going to rebound
in the coming year bolstered by a rebound in manufacturing and other economic
activities.
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Gati Ltd
Company Background
Gati is a pioneer in Express Distribution and supply chain solutions in India. Gati started
operations in 1989 as a door-to-door cargo company. A division of Transport Corporation
of India (TCI), it was the result of Mr. Mahendra K Agarwals conscious decision after
he returned from the United States with a degree in management. When he joined TCI in
1980, it was one of the top three transport companies in India. His aim was to rebuild an
otherwise successful TCI based on systems and processes and manage it professionally to
meet implicit and explicit consumer needs.
Based on customers feedback and interaction, Agarwal felt that, apart from moving
cargo, TCI could do something different which customers would value and appreciate.
Thus Gati was introduced in the market as a door-to-door cargo company with
commitment on delivery and money back guarantee. The name Gati was selected to
reflect and represent speed with direction.
Agarwal was aware that Gati was a late entrant to the generic cargo business. To make
progress, the business needed to be conducted with a different perspective. Gati was
willing to wait to generate surplus from the business. Agarwal chose time bound, point to
point delivery, premium priced cargo management service. With this offering, Gati
introduced the concept of express cargo in the Indian context.
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VISION and MISSON statement
Be a globally preferred provider of India-centric supply chain services and solutions, and
a leader in the Asia Pacific region.
Delight customers with quality service by setting new trends through innovation and
technology.
Be the most preferred organization for all stakeholders.
Be a responsible corporate citizen with the unwavering commitment to environmental
protection and conservation.
Business:
Gatis core business is Express Distribution and Supply Chain Solutions. It offers total
end-to-end logistics solutions to its customers.
Its two lines of business are
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Capabilities
Gati is Indias only multimodal logistics company, offering seamless connectivity
across air, road, ocean and rail. It is the Indias first logistics company to receive ISO 9001 certification
Gati covers 603 of Indias 611 districts, a reach unmatched by any other player.
It has a fleet of 4000 vehicles, 94 refrigerated trucks and 6 marine vessels to
ensure faster time to markets through well streamlined operations.
Leverages an extensive technology backbone that allows tracking of shipments
online
Provides real-time delivery information on shipments
Has over 2 million sq.ft. of best-in-class mechantronic warehousing space,
spanning the length and breadth of India
Delivers a record 3 million packages weighing over 46,000 tons every month
Has a dedicated workforce of 2,850 well trained Gatiites
Products/Services of Gati
Gati offers a host of products and services customised to meet the logistics requirements
of its customers. They are
Gati Surface Express
Gati Air Express
AI Gati Courier
Gati Art Express
Gati Supply ChainIntegrated Logistics
Gati Kausar Cold chain logistics
Gati Transport Solutions Full Truck Load
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Gati Europe Express
Gati Global Express
Gati Internationalthe global arm
Gati Coast to Coastthe shipping division
Gati Happiness Gift services
Gati Student Express
With its superior coverage, reach, facilities and capabilities Gati is all geared to provide
the best end-to-end logistics services to companies in different industry verticals. The
company has over the years has evolved from a desk-to-desk cargo company to a
preferred 3PL.
Performance of the company
The companys revenue has consistently grown at a CAGR of 12% from 2001-2009
increasing its share of logistics services in the country
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Evolution of business mix
Business by divisions:
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As can be seen from the below chart there has been shift in the companys business mix
over the years from low margin express segment to high margin logistics and freight
segment. The trend to outsource logistics to 3PL will further improve the earnings of the
company.
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Increase in assets and a rise in capabilities
The company has continuously invested in assets to increase its capabilities to deliver the
best logistics solutions. The company is transforming its network into a hub and spoke
model to increase the reach and operational efficiency.
Major competitors
The company over the years has built an extensive capability over the years to take on
competition, both from domestic and international competitors operating in the country.
But the competitors are catching up. Since the market for reliable logistics services is
increasing new players are entering the market and the established players areconsolidating.
Many large manufacturing and service units like Reliance, Mahindra & Mahindra, Future
Group have established their own in-house logistics divisions. Now these companies plan
to provide logistics services to other companies also.
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The major competitors of Gati in Express Division are
TNT
Safexpress
TCI XPS
AFL
Blue Dart
Distribution channels of Gati in Retail segment
In a country like India with so many diversities no single distribution channels is
perfect. Companies have to adopt a multi modal distribution network keeping in view
of the factors like market potential, nature of the product, customer expectations,
company strategy, industry trends, etc to reach a maximum number of potential
customers.
Gati has two types of customers one who has a long term relationship and regular
transactions with Gati. These customers are contractual customers who are extended a
period of credit as per the agreement. Then there are customers who do a single
transaction or irregular transactions with Gati, these customers deal with Gati on cash
basis and the segment is called Retail Segment. They can be either individuals or
businesses.
Gati is in service industry providing complex logistics solutions to customers. Gati
follows a multi modal distribution network to reach both business and individual
customers. Here time and material safety are critical factors affecting the customersatisfaction. So the company has to keep in mind these aspects while designing a
distribution channel.
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The different Booking channels in the distribution network of Gati are as follows.
1. 2.
3.
Booking/ Pickup
32
OU
OU
Kiosk / CafeGA
Customer Customer
OU
Sales Force GA
Customer
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4.
Online Booking/
Enquiry
5.
33
Customer
Company Website Sales Force
Customer
Customer Service
centreSales Force
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Elements of the distribution network
The several elements of Distribution network are as described below:
OU Operating Unit (OU) is the company office/hub which administers all the
operations in the regions under it. It may also act a transit hub.
Franchise - A franchise is a channel partner appointed by the company to carryout the
operations of an OU where the company doesnt have its own infrastructure or chooses to
do so depending on market conditions.
Kiosk A kiosk is a channel partner whose main job is to operate an outlet where
customers can book their shipments to be carried by the company.
Caf A caf is a company owned outlet where apart from booking services, other
services like Internet browsing, Printouts and Photocopying services are also offered.
GA Gati Associate (GA) is a channel partner who owns a vehicle and maintains it as
prescribed by the company whose primary job is to liaise with the areas sales force, take
shipment orders from customers, do booking, pickup the material from customers door
and deliver it at the regional OU.
Sales Force Sales Force consists of the personnel of the company whose key
responsibilities are Retention business development (RBD), New business development
(NBD), Channel partner development (CPD), Collections and Promotional activities in
the area under him.
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Channel Design
Earnings are shared with members of the distribution channels depending upon the
function performed by them in the channel, product, individual docket charges and rates
applicable after a ceiling on earnings of the member in a month.
Kiosk:
The main function of a kiosk is booking a shipment. A kiosk is paid depending on
whether it has its own connectivity with Gati, the kind of product offered and an upperand lower limit on margins per docket.
GA:
The main function of a GA is providing connectivity i.e. carrying a shipment. A GA is
paid depending on whether it is booking/delivery, the kind of product offered, and ceiling
on the earnings in a month and an upper limit and lower limit on margins per docket.
Franchise:
The main function of a Franchise is operating an OU. A franchise is paid depending on
whether it is booking/delivery, the kind of product offered, and ceiling on the earnings in
a month and an upper limit and lower limit on margins per docket.
For a detailed channel design of different members refer to Appendix B
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Analysis of survey of Gati kiosks and competitor outlets
A survey of all the24 kiosks of Gati in Kolkata over a period of 20 days to find out the
nature of transactions done at these outlets, average sales per month, promotional
activities carried out at these outlet locations and their experience with company and its
sales personnel.
Kiosk sales per month (in Rs)
39%
26%
17%
9%
9%
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From the above graph it is clear that kiosks are doing very low business in courierbookings.Competitors in courier services
24%
20%
23%
20%
13%
DTDC
Blue Dart
First Flight
Overnite
Others
From the above graph it can be concluded that courier industry is a very competitive one
with a large number of competitors vying aggressively with their distribution network
and price for the small pie.
Competitors in Cargo services
10%
37%
21%
7%
11%
14%
Blue Dart
Gati
Safexpress
TNT
XPS
Others
From the above graph it is clear that Gati has very little competition in cargo and express
distribution services and the company should focus on this segment.
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Experience with company and its workforce
0%0%
46%
37%
17%
Very bad
Bad
OK
GoodVery Good
What should be done by the company to increase sales at kiosks?
47%
21%
32%
Promotion
Improve services
Better support
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Distribution infrastructure of logistics companies in Kolkata
Courier companies
0
20
40
60
80
100
120
140
DTDC First Filight Overnite Gati Blue Dart
Cargo Companies
0
5
10
15
20
25
30
Blue Dart Gati Safexpress XPS AFL TNT
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From the above two graphs it is amply clear that Gati has adequate market penetration as
compared to other companies in cargo business. So the company should focus on its
cargo business and expand its share of the pie.
Conclusions and recommendations
The Indian logistics industry is going through a transformation. The sector will
see an unprecedented growth in the coming years with improved infrastructure
and a uniform tax structure. This will improve logistics performance and bring
down overall product cost making Indian products globally competitive.
Gati has good distribution network for cargo business as compared to its
competitors. But when it comes to courier business it does not have the adequate
reach to compete with the other courier companies who have huge distribution
infrastructure and compete on low prices.
From the survey of outlets, Gati (37%) is the preferred player in logistics services
for cargo business and Safexpress (21%) is its nearest competitor. But when itcomes to courier services it has many competitors like DTDC, Blue Dart and First
Flight.
Gati should expand its distribution network by setting up more outlets in prime
locations which will increase its revenues and also increases the brand visibility.
Gatis vehicles on road are a good mode of promotion, but it should step up its
promotion efforts by aggressively promoting its services through sign boards,
hoardings and media ads. It should support its outlets to promote the services of
Gati in their locality by providing adequate promotional material.
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Limitations
This study is an exploratory research to find out what kind of services are offered
by the company outlets, who are their competitors in their locality and what kind
of promotion is carried out by these outlets.
This considers only retail customers of the company who deal with company on
cash basis.
The study is carried out at outlets in and around Kolkata only. The results of the
study are applicable to that location only and the results may vary significantly for
other locations due to different distribution networks of the company and its
competitors and different market conditions.
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References
1. Mentzer, J.T. et al. (2001): Defining Supply Chain Management, in: Journal ofBusiness Logistics, Vol. 22, No. 2, 2001, pp. 125
2. Vrat, P., 1999. Supply Chain Management in India: Problems and Challenges. In:Sahay, B.S. (ed.), Supply Chain Management for Global Competitiveness, Macmillan,10-24
3. Seturam, S., 1999. Corporate Profitability and Supply Chain. In: Sahay, B.S. (ed.),Supply Chain Management for Global Competitiveness, Macmillan, 77-93.
4. Evans, R. and Danks, A., 1998. Strategic Supply Chain Management: Creatingshareholder value by aligning supplying chain strategy with business strategy. In:Gattorna, J. (ed.), Strategic Supply Chain Alignment, Gower, 18-37.
5. Mitra, Subrata., Logistics Industry: Global and Indian Perspectives, IIM CalcuttaResearch Papers
6. Mitra, Subrata., 2005, A Survey of the Third-Party Logistics (3PL) Service Providersin India, IIM Calcutta Research Papers
7. Deloitte Conference paper on SMEs in logistics: Bringing value to the changing Indianlandscape
8. Deloitte Report on Logistics and infrastructure: Exploring opportunities
9. May 28, 2008 Goldman Sachs Report on Indian logistics industry
10. Gati Ltd Annual Report 2008-09
11. BCG Report on Creating Distribution Advantage in India
12. Yerlan Ergalievich Manatayev, June 2004, Commoditization of the Third PartyLogistics Industry, MIT Center for Transportation and Logistics
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Appendix A
Questionnaire for Survey
1. Name
2. Address
3. Years with Gati Years in this industry
4. Nature of location
a) Commercial b) Academic c) Residential d) Institutional e) Industrial
f) Suburbs
5. Is the outlet company owned or outsourced?
a) Company Owned b) Outsourced
6. What are the products/services other than logistics being offered at the outlet?
7. What are the sales (from logistics) per month?
8. What is the Courier and Cargo business ratio?
9. What is the Cash and Credit business ratio?
10. What is the Domestic and International business ratio?
11. Is the booking done online or offline?
a) Online b) Offline
12. How many persons are employed in the outlet?
a) One b) Two c) Three or more
13. What are their qualifications? (Optional)
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14. What is the booking timing?
15. What are your major functions?
a) Booking b) Pickup c) Storage d) Dispatch e) Delivery f) Other
16. Is the pickup and delivery done by self or the company?
a) Self b) Company c) Third Party
17. Who are your competitors in Courier business?
a) Blue Dart b) DTDC c) First Flight d) Overnite Express e) Professional
f) Others (specify) g) None
18. Why do you think so?
19. Who are your competitors in Cargo business?
a) AFL b) Blue Dart c) Safexpress d) TNT e) XPS f) Others (specify)
g) None
20. Why do you think so?
21. What is the infrastructure and support being offered by the company?
22. How do you handle customer complaints?
23. Who do you communicate with?
a) Area sales person b) Service personnel c) Retail Manager
d) Service Manager e) Customer service executive f) Other
24. How do you communicate with the company?
a) Mobile b) e-mail c) Personal Visits d) Through Sales force
e) Through service personnel
25. What are the incentives being provided by the company?
26. What is your experience with the sales force and other employees of the
company?
a) Very bad b) Bad c) OK d) Good e) Very good
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27. What are the means (modes) of promotion in the area?
28. What should be done by the company to increase sales?
29. Any suggestions
Appendix B
Channel Margins
GA
Ceiling 50000Max/Dkt 580
Min/kt 15
BookingExpress Basis %
% AfterCeiling
Paid 9 6
TBB 7 6FOD 8 6
Priority Basis %
% AfterCeiling
Paid 8 6
TBB 6 6
FOD 7 6
Delivery
% % AfterCeiling
70Paise/Kg
60Paise/Kg
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Franchise connectivity
Ceiling 70000Max/Dkt 1000
Min/kt 22.5
BookingExpress Basis %
% AfterCeiling
Paid 13.5 8
TBB 12 8
FOD 10.5 8
Priori
ty Basis %
% After
CeilingPaid 12 8
TBB 10.5 8
FOD 12 8
Delivery
%% AfterCeiling
70Paise/Kg
60Paise/Kg
Franchise - Gati connectivity
Ceiling 70000Max/Dkt 1000
Min/kt 22.5
BookingExpress Basis %
% AfterCeiling
Paid 9 6
TBB 7 6
FOD 8 6
Priority Basis %
% AfterCeiling
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Paid 8 6
TBB 6 6
FOD 7 6
Delivery
%% AfterCeiling
70Paise/Kg
60Paise/Kg
Kiosk- connectivity
Ceiling No Ceiling
Max/Dkt 1000
Min/kt 10
Booking
Express Basis %
Paid 13.5
FOD 12
Priority Basis %
Paid 9
FOD 9
Zipp Basis %
Paid 22
FOD 22
Kiosk- Gati connectivity
Ceiling No Ceiling
Max/Dkt 1000
Min/kt 10
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Booking
Express Basis %
Paid 9
FOD 8
Priority Basis %
Paid 6
FOD 6
Zipp Basis %
Paid 17
FOD 17