Opportunities in Logistics - KPMG

8/3/2019 Opportunities in Logistics - KPMG

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BUSINESS ADVISORY

CONSUMER MARKETS

Tapping the emerging opportunities in LogisticsA perspective



2 © 2007 KPMG Advisory Services Private Limited, an Indian private limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

What is this document about?

• The Logistics sector in India is at the threshold of a rapid transformation

• While hitherto Logistics was largely considered a non-strategic ‘support’ function, it is nowemerging as a key strategic differentiator for several industries

• KPMG has been tracking this sector and enabling clients to effectively tap this potential and raiseresources for the same

• This document lays out KPMG’s perspectives on Logistics in India, the opportunities it throws upfor enterprises and how KPMG can partner with forward looking enterprises that see this potentialand wish to explore it




Contents

1 The Evolving Logistics Landscape

2 Opportunities

3Tapping Opportunities and Raising RequisiteResources – How KPMG can help


http://slidepdf.com/reader/full/opportunities-in-logistics-kpmg 4/194 © 2007 KPMG Advisory Services Private Limited, an Indian private limited company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Contents


2 Opportunities




Logistics costs in India are estimated at over Rs 4.5 trillion, growing at arate of 8-12%

Logistics cost in India equals almost 13% of its GDP

Logistics cost as % of GDP

Source: Cygnus Industry Report, 2005

2/3rd for the overall logistics costs arise from transportationand warehousing

11%

10%

9%

17%

13%

0% 5% 10% 15% 20%

India

China

US

Europe

Japan4%

6%

24%

27%

39%

Transportation Warehousing Inventory carrying

Order processing Administration

Components of logistics cost

Source: www.worldbank.com, 2002

India’s logistics cost is amongst the highest in the world (as % of GDP)



While traditionally logistics costs have been high on account of inefficiencies, theGovernment is now demonstrating a strong commitment towards reducing inefficiencies byproviding an enabling infrastructure and creating conducive regulations…

The government is investing heavily… …and seeking private participation

Kochi, Hyderabad Bangalore,Delhi and Mumbai airports

Pipavav, Mundra, Dhamra and several other portprojects

More than Rs 75,000 crores are being invested by privateplayers in NHDP program

In airports…

Ports..

These changes would incentivize larger, more organized operations

Roads…

…and other enabling initiatives

Rationalization of tax structure…

Overloading Act

Carriers Act1865

• Would encourage usage of more efficient high

capacity trucks.• Would help ensuring good condition of roads.

• Transparency of transportation trade.

• An equitable apportionment of liability between thecommon carrier and the consignor.

Current Structure Post VAT Structure Implication

Cascading Sales Tax

Structure

20 to 30 C&F agents

20 to 30 Warehousesover the country

No cascading tax

structure

Consolidation ofwarehouses

Increased complexityand volume of goods

handled

Reduction in share ofunorganized players

14 licenses (national and route specific) for privateparticipation in container movement have been awardedby the Government recently

and Rail

Capacity

expansion

• The development of dedicated freight corridor isexpected to increase rail capacity (which is currentlyconstrained by track availability on key corridors)

10,000

400

7,300

5,846Golden Quadrilateral

NS, EW Corridors

Port Connectivity

Non NHDP projects

Planned road expansion projects (KM)

Source: D’ Essence Consulting



In addition, emerging business trends are creating a strong growth thrust foroutsourced logistics services…

Abolition of trade quota… Evolving base for Contract manufacturing…

Capacityexpansion Integration Consolidation

Greater-than-ever need for a dynamic,reliable and efficient supply chain!

Impact on the industries dominated by global trade (e.g.apparel) De-risking

business

• While China still remains a clear leader in contractlogistics, Companies are keen to de-risk theirbusiness by spreading their manufacturing base toequally cost effective India

Domesticmarket

• Apart from manufacturing de-risking, the ever-expanding domestic market is also a big attractionfor companies to set-up their base in India

Businesses are looking towards rural markets with greaterinterest…

Demand for world class logistics services

Several businesses don’t have requisite logistics capabilities to manage the evolving landscape

Organized retail boom is expected to fuel logistics

outsourcing

Organized retail market (USD billion)

5000 towns

6,00,000villages

• Companies are increasingly finding urban marketssaturated and hard to penetrate

• Rural market offers a virgin territory for themarketers. However, the challenge is to distribute…with cost efficiency

Need for a deeper, cost effective supply chainSource: KPMG research

$23.0

$6.4

2006 2010



http://www.tvslogistics.com/default.asp




Contents


2 Opportunities





Opportunities exist across the spectrum of logistics activities…

Operations

Road

Rail

• Inventory control

• Pick & Pack• Bar-coding, tagging• Storage• Order management• Customer service

• Dedicated freight corridordevelopment

• ICD / CFS operations• Freight consolidation

• Storage

Water

Range of services

• ICD / CFS operations• Container terminals• Cargo handling berth

• Single buoy mooring

• Logistics parks

development• Transport hubs

development• Fleet ownership and hiring

Air

• Air cargo transshipmentwarehouse operations

M o d e s

• Greenfield portdevelopment

• Port approach channels

• Breakwater projects

• ICD / CFS infrastructure• Multimodal warehouse

infrastructure

• High quality warehouse

infrastructure development• Logistics parks

development• Transport hubs

development

• Air cargo transshipmentwarehouse infrastructure

• ICD / CFS infrastructure• Port based warehousing• Tank farms

• Container rail freightoperations

• Fleet management

• Carrier Routing• Carrier Negotiations• Legal Documentation• Track and Trace• Express services

• Express services• Freight forwarding

• Freight forwarding• Dredging• Pilotage and towage

• Stevedoring• Bunkering• Ship repair

Transportation Warehousing Transportation Warehousing

Infrastructure provision

Nature of opportunity

Immediate

Long term

Minimal




Contents


2 Opportunities

3Tapping Opportunities and Raising Requisite

Resources – How KPMG can help




Sample Case Study IIAssistance in achievement of growth aspirations for the logistics business of a $ 3bn Indian conglomerate

• A large Indian conglomerate wanted togrow its logistics business exponentiallyboth in terms of top line and bottom line

• The client had logistics capabilities acrossthe group which were functioningindependently

• There were opportunities of operationsimprovement across its logistics businesswhich the client wanted to tap

Client situation KPMG approach Client benefits

• Identification of initiatives required to achievegrowth aspirations

• Undertaking an organizational transformation

exercise

• Identification of logistics competenciesacross the group

• Developing and implementing a plan forleveraging these competencies andtapping synergies across them

• Undertaking an operational improvement andenhancement exercise spanning vehicletracking, barcoding, smart cards, billing processrealignment etc.

• Undertaking a organizational human resourcecapability building exercise

• Developing and implementing a sharedservices strategy to enhance focus on coreoperations

• Identification of initiatives required toachieve growth aspirations

• Competency based organization structure

that leverages logistics / SCM capabilitiesacross the organization to offer end-to-endsolutions to customers

• Detailing of initiatives into action plan andimplementation assistance on the same




Sample Case Study IIIDevelopment of vision and business plans for Mumbai, Kandla and Jawaharlal Nehru Ports

• The Ministry of Shipping, Road Transport and Highways (MOSRTH), hasmandated that each of the twelve major ports should:

• Develop a business plan that is in line with its competitive advantages andcapabilities and can be implemented without government financial supportand

• Install a process for monitoring and reporting progress in achieving resultsand provide the capability to annually update the plan

Client situation

As-Is Assessment Competitor AnalysisDevelopment of

opportunitylandscape

• An “As-Is” assessmentof all the ports across

various elementsincluding operations(equipment age, craneproductivity etc), ITinfrastructure,Environmental scenario,Expansion opportunities,Customer profile,

process evaluation,development plans andhinterland connectivity

• Competitor analysisthrough interviews with

port users to identifystrengths andweaknesses of the portvis-à-vis current andfuture competitors.

• Development ofopportunity landscape

across export importcargo, transshipmentcargo and other relatedareas including trafficprojections andopportunity assessment

Development ofVision

Development ofcommercial and

financing strategy

• Development of visionbased on competitor

analysis, as isassessment, globaltrends and opportunitylandscape.

• Development ofcommercial and

financing strategy for theport

• Transition ownership ofthe business plan to portpersonnel.

KPMG approach

• Identification of projects required to achieve vision through aproprietary integrated capacity assessment model.

• Conversion of projects into action plan for the port includingmilestones, critical success factors and broad level time lines

• Development of the business plan including financials based on theprojects and financing strategy.

Client benefits




Thought Leadership by KPMG in Supply Chain and Manufacturing

Indian Supply ChainBenchmarking Report

Indian Automotive Supply ChainDiscussion Paper

India’s Manufacturing Policy Draft

In addition, KPMG team publishes articles and white papers in seminars and business publications on supply chain management




Please contact:

Arvind Mahajan / Aman Khanna

KPMG Advisory Services Private Limited

Phone number: +91 (22) 39835526

Email: [email protected] / [email protected]

www.in.kpmg.com

mailto:[email protected]




Opportunities in Logistics - KPMG

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