The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and KPMG have jointly demanded conferment of ‘industry status’ on logistics industry as suggested move will bring down exorbitant logistics cost from current level of 14 per cent to 10 per cent of total value of goods produced in India in a bid to make its industry competitive.

The two institutions have observed that in developing countries these costs are between 6-8 per cent of total value of goods since logistics enjoy benefits in terms of tariff levels which reduce their high costs.

In a paper brought out by KPMG and ASSOCHAM which has been submitted to the government by latter’s President, Dr. Swati Piramal, it has been pointed out that administrative hurdles account for large delays and additional costs for logistics sector. Further, policies and procedures are complicated and vary from state to state. For instance, in truck transport from Kolkata-Mumbai, 32 hours are spent on various check posts. This implies a stoppage time of 1.5 hours for every 100 kilometers. Various agencies and reports have documented the lengthy procedures and extensive documentation of customs.

Trade procedures need to be simplified by improving co-ordination between various authorities. Various forms should be condensed and use of IT should be increased to provide similar information to different agencies.  Further, there should also be coordination between states to homogenize procedures and reduce the instance of physical checking.

Growth in multi modal transport is crucial for reducing logistics cost of Indian trade. As trade in manufactured cargo increases, there would be rising demand for multi-modal services. At present, cost of switching from one mode to another is high as different modal nodes are far away from each other.

Multi-modal licence norms could be relaxed to attract more domestic and global logistics providers to provide these facilities.  Further, related processes should be streamlined. At present, different liability regimes are applicable for different legs of transportation chain.  Specifically, shipping lines use Combined Transport Document, Freight Forwarders and multi-modal transporters use the various procedures which leads to increase in number of documents, costs and time involved.

To harmonize liability regime, there is a need to modify present laws and replace them with minimum criteria to be satisfied by all transporters involved.

As Indian market has become more globally integrated and competitive, companies would increasingly turn towards outsourcing entire logistics function to minimum possible number of entities with an aim to limit administrative burden.  In such a scenario, companies which can provide an entire range of required services would stand greatest chance to attract such businesses.

However, given the diverse nature of logistics services and hence capabilities required to deliver an integrated proposition, only a handful of players can reasonably target this market individually.  Most players will have to leverage packets of expertise of best-in-class players in each individual segment to pull together an integrated proposition.

The maturing of logistics industry in any country is reflected in the increasing vaue that higher degrees of specialization and service differentiation generate.  For example in warehousing, real estate owner, facility designer and developer, warehouse operator, utility service provider, IT systems integrator, transporter and overall service integrator need to emerge as specialized roles, each with its own value proposition.

An interest novel form of integration is emerging in logistics sector. A few private entity houses focused in infrastructure are acquiring small logistics companies – trucking, warehousing, freight forwarding.  There are funds infused in each to modernize facilities and spread the expansion.  These private equity houses aim to take combined bouquet of these companies in future to their clients and derive higher returns out of synergies.

The Paper further says areas of improvement exist in all segments of logistics chain viz., trucking, warehousing, rail transport, port operations, customs procedures, material handling etc.  while each of these needs to be addressed in their individual contexts at the earliest, greater imperative is to coordinate initiatives in a phased and planned manner. A logistics system works like a chain and is as strong as its weakest link and sub-optimal solution at any stage will lead to bottlenecks and inefficient execution.