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INDIAN INSTITUTE OF MANAGEMENT AHMEDABAD INDIA

Research and Publications

The Logistics Sector in India: Overview and Challenges
Pankaj Chandra Nimit Jain W.P. No.2007-03-07 March 2007

The main objective of the working paper series of the IIMA is to help faculty members, Research Staff and Doctoral Students to speedily share their research findings with professional colleagues, and to test out their research findings at the pre-publication stage

INDIAN INSTITUTE OF MANAGEMENT AHMEDABAD-380 015 INDIA

INDIAN INSTITUTE OF MANAGEMENT AHMEDABAD INDIA

Research and Publications

The Logistics Sector in India: Overview and Challenges

Pankaj Chandra Nimit Jain Indian Institute of Management Ahmedabad Vastrapur, Ahmedabad 380015 chandra@iimahd.ernet.in, nimitj@iimahd.ernet.in

Abstract

The logistics industry in India is evolving rapidly and it is the interplay of infrastructure, technology and new types of service providers that will define whether the industry is able to help its customers reduce their logistics costs and provide effective services (which are also growing). Changing government policies on taxation and regulation of service providers are going to play an important role in this process. Coordination across various government agencies requires approval from multiple ministries and is a road block for multi modal transport in India. At the firm level, the logistics focus is moving towards reducing cycle times in order to add value to their customers. Consequently, better tools and strategies are being sought by firms in order to enhance their decision making. In this paper, we provide a perspective on these issues, outline some of the key challenges with the help of secondary information, and describe some interesting initiatives that some firms & industries are taking to compete through excellence in managing their logistics.

IIMA

INDIA

Research and Publications

1

Introduction

The Indian economy has been growing at an average rate of more than 8 per cent over the last four years (Srinivas, 2006) putting enormous demands on its productive infrastructure. Whether it is the physical infrastructure of road, ports, water, power etc. or the digital infrastructure of broadband networks, telecommunication etc. or the service infrastructure of logistics – all are being stretched to perform beyond their capabilities. Interestingly, this is leading to an emergence of innovative practices to allow business and public service to operate at a higher growth rate in an environment where the support systems are getting augmented concurrently. In this paper, we present the status of the evolving logistics sector in India, innovations therein through interesting business models and the challenges that it faces in years to come.

Broadly speaking, the Indian logistics sector, as elsewhere, comprises the entire inbound and outbound segments of the manufacturing and service supply chains. Of late, the logistics infrastructure has received lot of attention both from business and industry as well as policy makers. However, the role of managing this infrastructure (or the logistics management regimen) to effectively compete has been slightly under-emphasized. Inadequate logistics infrastructure has an effect of creating bottlenecks in the growth of an economy, the logistics management regimen has the capability of overcoming the disadvantages of the infrastructure in the short run while providing cutting edge competitiveness in the long term. It is here that exist several challenges as well as opportunities for the Indian economy. There are several models that seem to be emerging based on the critical needs of the Indian economy that can stand as viable models for other global economies as well.

Chandra and Sastry (2004) have pointed towards two key areas that require attention in managing the logistics chains across the Indian business sectors – cost and reliable value add services....
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