Indian Logistics Industry Benchmarking Study and Analysis of Outsourcing Trends

Frost & Sullivan, December 2009, Pages: 360

The study provides benchmarking of Indian logistics service providers across eight key industry sectors on key performance criteria. It also provides a comprehensive analysis of the logistics spend, logistics efficiency and logistics outsourcing trends across each of these industries.

This Frost & Sullivan research service titled Indian Logistics Industry Benchmarking Study and Analysis of Outsourcing Trends, based on the company’s fifth annual ‘Voice of the Customer’ study on leading logistics service end-users in India provides a detailed analysis of the logistics outsourcing practices across all key industries in the country. The study focuses on benchmarking the performance of Indian logistics service providers (LSPs) on key criteria, which is based on the ratings provided by leading end-users from 8 key industry sectors in the country. Further, details are provided on the key logistics challenges and concerns of end-users, apart from major growth opportunities for third party logistics (3PL) providers in India as rated by logistics end-users. In this research, Frost & Sullivan's expert analysts thoroughly examine the performance of LSPs and logistics outsourcing practices in the following industries: automotive, consumer durables, fast moving consumer goods (FMCG), IT and telecom, pharma, retail, and textiles.

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Market Overview

Indian LSPs Lag Significantly Below End-user Expectations on Key Performance Criteria

Indian LSPs lag significantly below end-user expectations on key performance criteria such as attitude of staff, process improvement capabilities and material safety. The study also established that transportation was the most outsourced function to logistics service providers, followed by freight forwarding. Almost all companies from across all industries largely outsourced the transportation function, while about 60 percent of companies from across all industries outsourced freight forwarding functions to LSPs. Interestingly, warehousing was outsourced by only about half of the companies.

"About 90 percent of users across industries mentioned cost saving followed by preference to focus on core competency as the primary reasons for engagement of LSPs," notes the analyst of this research service.

The findings from the performance benchmarking of Indian LSPs, which is based on the ratings provided by leading end-users from 8 key industry sectors in the country revealed that LSPs performed well above user expectations on few key parameters such as fleet size, vehicle quality, number of warehouses, and warehouse size. With regard to aspects such as value addition, consignment tracking facility, and cost saving initiatives, LSP performance came close to end-user expectations. However, the Indian LSPs have lagged significantly behind end-user expectations on key performance criteria such as process improvement capabilities, material safety, and attitude of staff.

Another interesting fact found by the study is the lower preference of end-users for long-term contracts with LSPs. Observations reveal that long-term contracts between LSPs and end-user companies were found to be low across all industries in the country. A majority of the companies either had no contracts with LSPs or had just one year contracts, indicating a tendency toward frequent change of LSPs.

"Foremost among the challenges in logistics for a majority of companies across industry verticals are safety of goods during transit and warehousing, inefficiency of LSPs in adhering to timelines and the low skill levels of logistics personnel," says the analyst. "Inability of LSPs to keep pace with evolving volumes of end users and the lack of multimodal transpiration capabilities are other impediments. Further, the risk of information leak is a cause for angst among end-users."

Moreover, a significant share of companies across industries could not gain notable (5 percent or more) improvement in their logistics efficiency despite using third party logistics (3PL) providers. About two-thirds of automotive industry was in this category, while about 55 percent of companies from auto components and pharma industries are also reported to be in this category.

End-user opinions revealed that major opportunities for 3PL service providers in India exist in developing technology solutions and infrastructure (logistic parks), as well as providing multimodal transportation.

"LSPs should work toward improving their performance on criteria where they currently lag below end-user expectations, apart from adopting advance methods and technologies in supply chain and use them to offer better services to end-users, which is likely to reduce the challenges and concerns of end-users" observes the analyst.

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:

By End-use Vertical:

- Automotive
- Consumer durables
- FMCG
- IT
- Telecom
- Pharma
- Retail
- Textiles
- Technologies

The following technologies are covered in this research:

- Warehouse management system (WMS)
- GPS
- RFID
- Transportation management system (TMS)

- 1. Introduction, Objectives and Methodology

- 2. Executive Summary

- 3. Logistics Benchmarking and Analysis of Outsourcing Trends
- - 3.1 Overall India
- - 3.2 Indian Automotive Industry
- - 3.3 Indian Auto Components Industry
- - 3.4 Indian Consumer Durables Industry
- - 3.5 Indian FMCG Industry
- - 3.6 Indian IT & Telecom Equipment Industry
- - 3.7 Indian Pharma Industry
- - 3.8 Indian Retail Industry
- - 3.9 India Textiles Industry

- 4 Introduction, Objectives and Methodology

- 5. Executive Summary

- 6. Logistics Benchmarking and Analysis of Outsourcing Trends
- - 6.1 Overall India
- - 6.2 Indian Automotive Industry
- - 6.3 Indian Auto Components Industry
- - 6.4 Indian Consumer Durables Industry
- - 6.5 Indian FMCG Industry
- - 6.6 Indian IT & Telecom Equipment Industry
- - 6.7 Indian Pharma Industry
- - 6.8 Indian Retail Industry
- - 6.9 India Textiles Industry

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