Indian shippers with re-

gard to outsourcing logis-

tics to 3PL and 4PL par-

ties and freight forward-

ers in India face stiff

competition from multi-

national forwarders for

international freight

movement.

Poor physical infrastruc-

ture and communication

barriers are another deter-

rent to attracting invest-

ments in the logistics sec-

tor and bringing an urge

for digitalization for lo-

gistics sector. Low pene-

tration of IT and lack of

proper communications

infrastructure also result

in delays, and lack of

visibility and real-time

tracking ability, although

introduction of SAP in

supply chain management

has allotted a lot of relief

against this.

Service tax levied on lo-

gistics service fees

(currently 12.36% with

educational cess) may

make outsourcing costly

and outweigh the possible

benefits.

Management graduates

do not consider logistics

as a prime job.

14% to 9% of the GDP

(i.e. level in the US), sav-

ings a handsome amount

of USD 50 billion will be

realized at the current

GDP level, making In-

dian commodities more

competitive in the global

ma r ke t . Mo reo ve r ,

growth in the logistics

sector implies improve-

ment in service delivery

and customer satisfaction

enhancing growth of In-

dian exports and potential

for creation of job oppor-

tunities.

Competitive dynamics

and other issues

Logistics is a low-margin,

high-cost business which

is indeed in requirement

of economies of scale and

six sigma. Apart from the

non-uniform tax struc-

ture, Indian LSPs

(logistics service provid-

ers) have to pay numer-

ous other octroi (a duty

levied in some countries

on various goods entering

a town or city) and taxes,

and face multiple check

posts and police harass-

ment on routes.

There is lack of aware-

ness and trust among the

Logistics is quite an old

concept; it has become

very efficient only after the

wave of 1990s globaliza-

tion. The implied meaning

of Logistics refers to the

management of the flow of

resources between the point

of origin and the point of

consumption at right condi-

tion material, at the right

place, at the right time and

at the very lowest cost.

Industry-size

The compounded annual

cost for logistics in India is

estimated to be around 14%

of the GDP, and out of this

USD 140 billion is logistics

cost i.e.; almost 99% ac-

counts to the unorganized

sector (such as owners of

few trucks, affiliated to a

broker or a transport com-

pany, freight forwarders,

small warehouse operators,

customs brokers, etc.), and

slightly more than 1%, i.e.

USD 1.5 billion, is contrib-

uted by the organized sec-

tor. So, it can be easily ana-

lyzed that the logistics in-

dustry in India is in a nas-

cent stage. However, the

industry is growing at fast

pace and if India can cut

down its logistics cost from

Logistics – Two faces of the same coin

Inside this issue:

Logistics-Two faces of the

same coin

1

Corporate speak 2

Quick bytes 3

Quote for the Month 4

February 2014

Volume 3, Issue 2 MI’BYTES

BUSINESS LETTER Masters of International Business

Centre for Management Studies

Jamia Millia Islamia University

Page 1

Ques1: In context of Indian consumer market, what are the emerging trends (In terms of

Price, Quality and Consumption pattern)?

Ans1: Let me give you a little more holistic answer to this question instead of breaking the

answer into price, quality and consumption because to a large extent they are linked to each

other. There has been a slowdown in the Indian economy which means the churn of goods and

services has slowed down. On the other hand, lending to this scenario is the fact that our infla-

tion in the country has crossed 10%, which is high. A combination of both has meant that the

consumer has got a lesser disposable income than in the past. So what happens when a con-

sumer has got a lesser disposable income, they re-adjust their household budget. Readjustment

of household budgets means you have to make some choices. If I was planning to buy a house i

will probably delay that decision. I will also probably trade down. Trading down can happen

across categories so what it means is that instead of buying expensive or premium products, I

may buy the regular variant. Companies are also readjusting to offer the consumer more rele-

vant products. Further, the consumption is slowing down and the consumer is becoming a little

more discerning seeking more value by trading down or sideways.Keeping in mind the present

scenario, consumer instead of buying a little up-scaled product is settling to buy a mass or

popular product in the economy segment.

Ques2: In today’s competitive world apart from combination of 4P’S of marketing,

where does customer retention stands in contributing to profits of an organization?

Ans2: I think you have to realize this, that the 4P’s are getting much diffused now. They are

becoming less and less relevant with every passing decade. This decade is about being able to

address a very heterogeneous market, what this means is that your customer is present at vari-

ous platforms today. There used to be times when communication, brand building and reten-

tion used to be very easy. For example: In the time when Doordarshan used to be the only

channel companies would advertise their product/brand and it will become a national brand

but that is no longer possible. In the present scenario getting to the consumer is getting more

complex, more challenging and more expensive. I would say, on one hand, retention is easy

because if you have a market share it is unlikely that a competitor can snatch it away from you

overnight because the cost of reaching your target group will be very high. On the other hand,

you have to always assume that consumer can always compare your product with other prod-

uct in the market and can shift to other brands or products, specially if you are not able to

cater to the consumers’ needs with your current product.

Ques3: India being the largest importer of edible oils what are the major steps govern-

ment can take to become self-reliant/sufficient?

Ans3: The government has taken limited steps. India is deficit in edible oils as about 70% of

all the edible oils are imported. So the government first objective is to make sure that the

population gets the edible oil. They have to make it a little bit of a free market kind of scenario

where they have to encourage people to go and buy from anywhere where the edible oil is

cheapest in the world. The government has to provide a fair degree of attention to the local

industry as there is a vibrant local edible oil industry of two kinds, first one is that starts from

the seed and ends in the bottle and the second one is where all this is crude in nature and gets

refined. The government keeps on intervening at regular intervals.

Ques4: How do you maintain your Brand share as consumers are ready to shift as others

brands are there to satisfy their needs?

Ans4: That’s very simple, the activities that we do to retain our brand share is to obviously

retain our consumer. So our consumer has to be with us. Let me give you an example: you

have to offer the consumer the best value for money, it’s a fundamental point. If you are selling

a product today and you suddenly find that your cost is reduced you have to pass on the benefit

to the consumer because believe me if you don’t, your competitor will, and your

CORPORATE SPEAK

Mr. Aseem Soni

Director-Consumer Pack Vertical

Cargill India Private Limited

“4P’s are getting

much diffused now”

Page 2

“Activities that we do

to retain our brand

share is to obviously

retain our consumer”

Cont….On Page 3

About Cargill India

Cargill was founded in 1865

by William W. Cargill when

he bought a grain flat house in Conover, Iowa. Cargill’s

operations in India started in 1987. Cargill employ more

than 2,000 employees working

in offices and plants across the country and have a net-

work of warehouses and de-

pots. Cargill provides food, agriculture, financial and in-

dustrial products and services to the world. Cargill has

142,000 employees in 67

countries who are committed to feeding the world in a re-

sponsible way, reducing envi-

ronmental impact and improv-ing the communities where we

live and work.

Volume 3, Issue 2

consumer could go away from you. The other thing is to keep your innovations alive and give

your consumer some choices. Recently, we blended our basic sunflower oil with olive oil and

offered it to our consumer at a price which the consumer is willing to pay. So what I am saying

is that sometimes you have to keep yourself alive to the situation what your consumer wants

and therefore be able to service the consumer need accordingly, not necessarily through your

core offering.

Ques5:If you fail to appropriately manage your sales team, it might result in losses so

what is the best way to manage a sales team?

Ans5: You need right people, people who are hungry, competent, passionate to make a differ-

ence and who have pride in what they are sell with a portfolio that they are selling. You then

have to align your plans to them. Gone are the days that you stood up and instruct or direct

your team. Today, you need to align with them your plans, what you want to do, you have to

understand it and appreciate it, contribute to that plan, empower them to take decisions on the

fields, expect results from them and monitor them, review their performances, give them feed-

back. So, this is the game all the time, it's a dynamic game specially if you are looking for a

large sales team force, different people will be at different levels of this so called management

flow.

Ques6: Consumers are becoming more health conscious these days, so how are you posi-

tioning your products now?

Ans6: If you talk about Cargill, then I think we are yet to start working on that in a meaningful

way. We have got largely 3 or 4 brands in our portfolio and the strongest brand that we have is

Gemini, it is a brand that stands for Quality. There is a potential to offer or sort off link or po-

sition one of our brands in our portfolio in the health and wellness segments which is the next

big thing. But, you know when health and wellness comes to the edible oil, it is a little ironical

state because oil per say is not healthy but you need it for cooking. An oil is an oil, so you have

to be careful in what you are consuming. Our Endeavour is to offer the best product. But to be

able to take a strong health and wellness platform for edible oils; you should be able to differ-

entiate your brand from the rest of the brands in the market place. But today, if you ask me, not

a single brand in the edible oil segment except say Saffola from Marico (which is also very

debatable) is positioned sharply in the health and wellness segment. So, it's a very tricky thing,

but that's work in progress for us.

Ques7: What is more important for you as Director Sales, a quality product or excellent

customer services?

Ans7: This is not the decade of making choices between quality and customer service. So, I will

take an example of 'Kinley Water Bottle', you go to a railway station will you get this bottle or

brand? Probably not. You will get a local brand there. So, that sort off partly answers your

question, you have a wonderful product but it's not available at the right time when they want

it, so my customer service goes for a toss. Alternatively, I can have a wonderful customer ser-

vice but I can't meet up with the quality that I delivered earlier, it might result in loss of cus-

tomers. Apart from this, there has to be a value for money that you have to add to these two

things. Value doesn't mean cheap, value means, you can also make your consumers trade-up

because consumer feels there is more value. Coming back to the same biscuit example- Parle G

consumer can be made to buy a Britannia Milkbikies (Britannia Milkbikies is more expensive

than a Parle G) but consumer finds probably more value in Britannia Milkbikies than a Parle

G. So you can always trade-up and get consumer pay more but you have to give your consumer

far more value in return. So, value cost equation therefore becomes more meaningful and at-

tractive for her.

Ques8: Despite the fact that rural markets are a huge attraction to marketers, what all

are the major challenges that a company may face?

Ans8: What will make a consumer in rural market to buy a product. There are 3 things in this.

One is complete knowledge about your product, what it delivers, what value it offers. Secondly,

it's accessibility of the products. Finally and equally important, the consumer should be able to

afford your product. I think as long as an organization ensures all 3 things, it's a hit, but it does

seems easier said than done. It's a nightmare to make your product

“Value doesn't mean

cheap, value means,

you can also make

your consumers trade-

up ”

Page 3 Volume 3, issue 2

Cont...From Page 2

Cont...On Page 4

QUICK BYTES

Major Commodity Exchanges

1. CBOT (Chicago Board Of

Trade): commenced in the

year 1848. Futures and

options contracts on corn,

wheat, soybean, ethanol,

oats and rough rice, soy

oil and soy meal.

2. LME (London Metal Ex-

change): Commenced in

the year 1920. Deals in

copper, primary alumin-

ium, nickel, lead, tin, Zinc

and Aluminium Alloy.

3. ICE (Intercontinental

Exchange): Commenced

in the year 2000. ICE

futures offers the bench-

mark IPE Brent crude and

IPE gas oil. Trades natu-

ral gas, electricity and

emission contracts as

well.

“3 things to be kept

in mind while deal-

ing with rural con-

sumer: Knowledge

about product, Ac-

cessibility of the

product and Afforda-

bility”

There is lack of skilled and knowledge-

able manpower in the logistics sector.

Recommendation

Since government bodies play a vital

role in this sector hence there is an

urge to harmonize and streamline the

process in order to reduce the stop-

pages and touch points of freight

movements so that the movement

can be swift.

Since the cargo carrying capacity via

roads is limited hence the movement

of bulk commodities can be partially

channelized by some appropriate

modes such as water or railways.

Uniformity in Benchmarks is indeed

very necessary in shipping, ware-

housing, storage and other transpor-

tation equipment so that this can en-

hance the modernization and provide

technicality to this particular indus-

try.

Clearance activities should be carried

out away from the sea and airports to

avoid congestion.

Six Sigma methodologies - If we

apply this to logistics processes, it

can optimize the processes of a com-

pany to perfection while decreasing

variation and improving the extended

supply chain. Shipping and logistics

companies incorporating Six Sigma

into their culture reports gradual and

dramatic improvements in reliability

while also cutting out excess dollars

cost from their supply chains.

By—Harsh Wardhan Rathour

2nd Year MIB, JMI

Logistics – Two faces of the same coin

E-mail: suban.ajam@gmail.com,

habib.siddiqui100@gmail.com,

9650430820,8285817199

For Previous Editions Pleases Visit www.jmimibytes.webs.com

Quote For The Month

“I don’t believe in taking right decisions. I take decisions and then make them right”

Ratan Tata

Cont...From Page 1

EDITOR-IN-CHIEF:

Ms. Sunayana Kumar

STUDENT EDITORS:

Harsh Wardhan Rathour

Michael Akbar

Habib Ullah Siddiqui

Suban Khalique Ajam

INTERVIEW BY:

Ifrah Khan

Suban Khalique Ajam

reach the hinterland in the country because you can't go there. You will be dependent on the

wholesale network and what is pushed through the wholesale network, is what is accepted for

which there is a demand in the market. So, you have to communicate with rural consumers,

which is not cheap. Then you need to have a product in terms of pitching at the right price

because of affordability, it has to be sized right, packaged right because it needs to travel dis-

tances. So, it's very complicated, that is why most companies, don't have a direct rural deliv-

ery system. Whichever brands are sold in rural today, are either local or they have a history of

5-8 decades of continuous work being in that direction. They have set their distribution sys-

tems, marketed their products through different channels like sampling, hard promotions, van

promotions all that over a period of time, that is how they have driven their roots today. But

it's a tough thing

Ques9: What will be your message/advice to international business students at Jamia

Millia Islamia?

Ans9: All that I can say is that invest in your careers with a very mature mindset. Don’t be in a

hurry to keep changing jobs for money. Join larger or older organizations that have got sys-

tems or processes in place and grow with them. The early time is critical in molding your

knowledge about how the industry functions. So it’s important that you pick up the right habits

and right habits are developed by working in the right company.

Page 4

Masters of International Business,

Centre for Management Studies,

Jamia Millia Islamia

Cont...From Page 3