Logistics in India

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Case Abstract-
Logistics industry in India has seen a tremendous growth in the last decade. In 2010 it recorded revenues of about US$ 82 billion. It generates employment for 45 million people in the country. The industry is forecasted to grow at a CAGR of approximately 8-9% over the next few years. The primary growth drivers in the industry are: Investments in the infrastructure sector

Streamlining of indirect tax structure with introduction of VAT and the proposed GST Robust trade growth
Globalization of manufacturing systems and advancements in technology Growth in various industries such as automotive, engineering, pharmaceuticals & textiles The growth of Indian logistics industry in the last 2 decade is backed by policy changes and other factors that have contributed to the growth in the economy. Logistics cost at US $ 90Bn is ~ 13% of GDP and is the highest when compared to the developed nations like United States of America or Europe. The Logistics sector is undergoing a metamorphosis from an unorganized sector to a structured and technologically oriented industry. With the growing economy, government’s focus on manufacturing and agriculture, increased consumerism and rural development the need for stronger transportation, warehousing and value added services like packaging, track n trace, cold chain etc. is very essential. But, unlike other sectors that are trying to grow independently or in silos this sector depends heavily on infrastructural developments. The current rail /road / air /sea transportation infrastructure is far behind the acceptable levels. Apart from infrastructure even the service quality levels and unorganized sector forming cartels and increasing prices also hinder the growth of this industry. Refer Exhibit 1 for the comparisons of GDP spend by different countries and the constituent contribution by segments. Cargo airlines(or also called as airfreight carriers) are basically used to transport items that had very high value in terms of money, are small to medium in dimension and have to transported from one point to another in a very short span of time. But with the advent of newer and better technologies in aviation industry, cargo carriers today are being used to transport even the over dimension cargos (ODC) over large distance. While this mode of transport provides some great advantages over other modes of transport like high speed and quick service it also has some disadvantages like high cost and huge initial investment. In the year 2007-08, the domestic air freight market was at 568 metric tons amounting to a total of 20.14 billion INR. Market analysis showed that this segment of transport will witness a growth of 12.9% CAGR over the next 5 years and reach a capacity of 1043 metric tons by 2012-2013. At the realization level of that year, the industry will amount to 36.9 million INR by 2012-2013. With the industry growing at such a phenomenal rate, Capt. G. R. Gopinath, the founder of Air Deccan, came out with his low-fare model for the air cargo industry. This was more or less a replication of the low cost aviation model of “Air Deccan” that Capt. Gopinath had already come out with in the year 1995. With this unique business model of low-fare cargo, Deccan 360 was ready to take on its rival Blue Dart head on. Going further, Capt. Gopinath ensured that the services of Deccan 360 will be priced 10-15% lower than Blue Dart. Blue Dart during the same time was the market leader in the domestic air express industry and commanded a massive 43% market share and in the ground segment, they garnered a market share of 8%. With the vision of being the next “FedEx” of India, Capt. Gopinath was planning to invest about Rs 400cr in building infrastructure such as warehouses and fleet expansion. The express logistics venture The “Deccan 360” was launched at the Delhi International Airport in the month of May 2009. The keystone for this project, Capt. G. R. Gopinath, who had already launched...
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