“This is one of the segments where IT utilisation is maximum compared to other segments in the logistics space,”he notes.
A fragmented industry
The Indian logistics industry, comprising many disorganised enterprises, transporters, express cargo movers, courier companies, freight forwarders, container companies and shipping agents, is highly fragmented. Firms are facing competitive pressures to focus on core operations and to lower costs which is leading to a growing demand for outsourced logistics services.
The Indian logistics industry’s size is estimated at INR2.55 trillion for FY 2008, and its size is expected to grow to INR4.1 trillion by 2013. Although road freight constitutes 60 per cent of the overall industry, the sector is entirely vested in the hands of small private players. The top-end of the market is controlled by a handful of multinationals and large domestic players.
Nadkar says India spends around 13 per cent of its GDP on logistics, higher than in the US (10 per cent), Europe (11 per cent) and Japan (10 per cent), and this translates to around INR1.5 trillion in extra operating costs for the economy and therefore a loss in capitalformation.
A growing air sector
According to Cygnus Research, the air transport sector contributes over 0.2 percentage points to the country’s GDP at constant 1999-2000 prices.
The Technology Survey shows that the Indian logistics industry’s IT expenditure will more than double to about INR10 billion from the existing INR4 billion within the next 5 years – a compound annual growth rate (CAGR) of about 20–22 per cent.
According to the World Air Cargo Forecast 2006-2007, the market from India and its neighbouring countries constituted about 3.9 per cent of the world’s air cargo traffic in tonnage and 4.2 per cent in tonne-kilometres in 2005-06.
India is now among the top 30 global freight markets, both in terms of total and international freight operations. According to industry forecasts, the airline’s cargo business segment will more than triple by 2025. Overall, the growth rate of the aviation sector in the next 10 years is expected to be not less than 25 per cent.
According to the Planning Commission, India’s air cargo movements would grow at over a CAGR of 11.5 per cent from 2007-08 to 2011-12. Air cargo handling warehouses will need an estimated 150,000 sqm of space in thenext 5–10 year
Urgent need to invest
Nadkar says India risks missing out on 1 to 2 per cent GDP growth unless significant strides are made to bridge the IT gap and improve supply chain efficiencies by effectively using technology.
“Airfreight is often the neglected cousin of an airline, as well as an airport’s passenger business. Air cargo complexes in India are congested not only because of lack of capacity but also due to lack efficiency and planning,” he said.
“Technology can help Indian airports overcome some of the space related constraints and utilise the existing resources in a better way. For example, the airports can make provisions for the agent to pay all his airport charges, request for carting orders, receive advice of arrival and delivery order, all from his office rather than queuing up at the airport counters,” he says.
Similarly, an advance notification from the agent for bringing in cargo can help the airport operator plan his resources accordingly. This will stop the airport terminal gates from being choked with trucks which have to wait endlessly to load/unload cargo.
Nadkar says barcode and RFID usage can help track cargo through its life cycle. This also helps faster location of shipments at the cargo warehouse.
He points to the express delivery industry – which is made up of GATI, Safexpress, TNT (Speedage), TCI, Blue Dart and Safe Express – as the leaders in technology usage. These players will continue to remain the highesttechnology buyers constituting to 33 per cent of the technology expenditure by2013 from the present 29 per cent.
The key growth driver in this sector is the opening of banking, insurance, retail, aviation and telecom sectors and their penetration in smaller cities due to an increase in global and domestic trade.
Nadkar says India is emerging as a global outsourcing hub for IT, ITeS, pharma, textiles etc., and is set to become one of the largest trading partners in Asia.
Regarding India’s courier sector, he says there was an increased usage of express and courier services by all key segments in the industry. The key players include Blue Dart, First Flight, AFL, DTDC, Overnite and Professional Couriers.
Commenting on the freight forwarding industry made up of AFL, Alpha Cargo Express, Om Logistics, Total Logistic, Worldwide and All Cargo, Nadkar says technology expenditure in freight forwarding is expected to grow by 160 per cent.
This industry, which presently constitutes 14 per cent of the IT demand, is expected to rise to about INR1.7 billion, comprising 17 per cent of overall IT spend by FY 2013. Th e current IT market size is about INR110 billion (US$2.3 billion) and is expected to reach INR211 billion (US$4.4 billion) by FY 2013.
Nadkar says there are an estimated 2000 to 2,100 freight forwarders in the country, including about 600 involved in airfreight. This includes key players like, Total Logistics, GATI, Excel, Bax Global, Geologistics, Dynamic Logistics and TVS Logistics.