Sectoral Reports
Courier and Logistics |
Executive Summary The courier/logistics industry specialises in time-definite, reliable transportation services for documents, packages and freight. This is done via a combination of transport networking that includes road, rail, sea and air for door-to-door delivery. This extensive distribution system is supported by infrastructure that comprises hubs, warehouses, IT technology and human resources, as well as offices in various cities. The fortunes of the industry are inextricably linked to the volumes of business that is generated, because this industry has a very high level of operating leverage. Thus, growth of this sector is driven by macroeconomic variables directly linked to the manufacturing sector and trade. E-commerce will present a huge growth opportunity, as there is expected to be a lot of business coming from Internet and e-commerce activities. Owing to a good distribution network, the courier industry is well positioned to tap emerging opportunities from e-commerce B2B and B2C trade. In India, the logistics industry is still at a very nascent stage. However, as more and more parties outsource their supply chain management, third-party providers stand to gain. With the total value of e-commerce transactions in India expected to rise to around Rs 100 billion by 2002, logistics is expected to account for 5% of the value. Overview The courier/logistics industry specialises in time-definite, reliable transportation services for documents, packages and freight. This is done via a combination of transport networking that includes road, rail, sea and air for door-to-door delivery. This extensive distribution system is supported by infrastructure that comprises hubs, warehouses, IT technology and human resources, as well as offices in various cities. Over the past two decades, courier services have grown increasingly important to businesses needing to use "just-in-time" manufacturing and retailing techniques and supply-chain logistics in order to remain competitive. Increasing reliance on these services has led the industry to grow at close to 30% over the past four years. Owing to the growing demand for reduced transit time and early deliveries the industry is forecast to grow at 25% for the next two to three years, making this one of the fastest growing segments in the transportation of cargo. International express cargo holds 6% of the express cargo industry, but is forecasted to reach 40% by 2017. Since transportation is a major part of the
operations of courier companies, transportation
costs form the single largest component of
their operating costs. The fortunes of the industry are inextricably linked to the volumes of business that is generated, because this industry has a very high level of operating leverage. Thus, growth of this sector is driven by macroeconomic variables directly linked to the manufacturing sector and trade. Key Players (Indian) A B C India Autoriders International Balurghat Technologies Blue Dart Express Bombay Baroda Roadways C R C Carrier Chartered Carriers Chokhani Global Express Coastal Roadways Container Corporation Of India Corporate Couriers & Cargo DHL Elbee Services Fedex Frontline Corporation Gati Inter State Oil Carrier Jai Yatayat Menlo Worldwide Orbit Multimedia Patel On-Board Couriers Patel Roadways S E R Industries Skypak Services Specialist T C I TNT Express Current Trends The domestic courier industry with a turnover of Rs 20 bn is still at a nascent stage when compared to developing countries like China where the industry is five to six times bigger. At present, there are about 2300 courier companies
in India, but four major players in the premium
organised segment dominate the industry. Blue
Dart Express Ltd. (Blue Dart) is the market
leader, with a 36% market share in the domestic
market, and Elbee Services Ltd., the second
largest player, has a 20% market share. AFL-DHL
is primarily focused on the international segment,
where it is the market leader, whereas Gati
Corporation Ltd. (Gati) is the market leader
in the domestic packages, ground distribution
segment. In the domestic air packages segment,
Blue Dart (now a part of DHL) has developed
its own air network and aircraft operations,
is currently the market leader. In the mid-1980s, professional couriers were used primarily to send time-sensitive documents. However, this trend began changing towards end-1980. It was during this period that payers like Blue Dart and Elbee really made an entry and, by the end-1980s, began shipment of samples for non-commercial purposes. This period saw the domestic express industry growing at 30-35% per annum. Strategic alliances with global express companies give Indian companies access to global markets, without having to replicate their network in the international market. Liberalisation and the export boom in the early 1990s gave a further fillip to the industry. The end of 1996 saw a slowdown that stemmed from the economic recession and slowdown in industrial growth. Most Indian companies have seen impressive growth in volumes this fiscal, with growth primarily being in the high-volume document business. In FY00 the industry recorded revenue of Rs 20.1 bn. A recent ORG-MARG survey forecasts the industry growing at 20% per annum over the next 5 years, to Rs 50.4 bn. The organised segment dominates the package and the premium document business since it requires a strong infrastructure and resources, while the low-yield document business is the domain of the unorganised sector. However in value terms the share of the organised sector is 64% and of the semi-organised and unorganised sector is 36% inspite of the large volumes it handles. International operations are less profitable,
compared to domestic operations, due to the
imperatives of revenue sharing of international
business with the global partners. The revenue
sharing break-up is more favorable to the partner
who has a majority share (60%) of all international
consignments delivered in India. This forces
Indian companies to realign their product mix
in favour of the more profitable domestic non-document
business. Currently 64% of the revenues accrue
from domestic operations and 36% from international
operations People Challenges Wide Skilling: The courier and logistics are in the services sector and by this virtue, will have to take a look at widening their skills at all times. A strong focus on team building skills and communication will be required. Leadership: Increasingly companies are shedding
off their precious status of being in a business
where business is assured. There is a lot more
emphasis on leadership all around. Outlook - Courier A few large players in the organised segment dominate the Indian industry. High entry barriers will provide sustainable growth opportunities for these companies in the future. E-commerce will present a huge growth opportunity,
as there is expected to be a lot of business
coming from Internet and e-commerce activities.
Owing to a good distribution network, the courier
industry is well positioned to tap emerging
opportunities from e-commerce B2B and B2C trade. E-commerce has become increasingly dependent
on express companies for delivery of goods,
rather than set up infrastructure for this
purpose. Research has shown that, worldwide,
B2B commerce is expected to grow from the present
$138 bn to $541 bn by 2003. Indian courier
companies are looking at additional volumes
from B2C and other portals. Third Party Logistics (TPL), whereby companies outsource logistics requirements in relation to Supplier Chain Management (SCM) and Customer Relationship Management (CRM), is also a big growth opportunity. Courier companies like Blue Dart and Elbee are positioning themselves as total logistics solution providers.
Courier companies are looking to be dominant regional players, as margins from domestic operations are 20-25% higher than those from international operations. With custom duties expected to come down, courier companies are bullish on international inbound volumes. With the increased usage of fax, e-mail, etc.
as well as increased competition from the emergence
of a number of players in the semi-organised
and unorganised sectors, the incremental business
from the document segment has slowed down.
This has already happened globally, and the
trend is evident in the domestic market too,
with the reduction in prices, by around 30%
in the last three years. According to research estimates the total
costs of owning an aircraft are approximately
Rs 1300 mn as against Rs 800 mn for commercial
airlines. This includes not only the high fixed
costs but also the cost of Air Turbine Fuel
(ATF). With fixed costs being really high for
aircraft operations companies have to rely
on high operating leverages. When volume growth
is low using commercial airlines are more viable
as this model works on a lower fixed cost and
a higher variable cost. Owned aircrafts however reduce the dependence
on commercial airlines. Moreover the plus of
owning an aircraft is the flexibility to operate
at night and ensure a 10:00 am delivery in
the morning Outlook logistics In India, the logistics industry is still
at a very nascent stage. However, as more and
more parties outsource their supply chain management,
third-party providers stand to gain. With the
total value of e-commerce transactions in India
expected to rise to around Rs 100 billion by
2002, logistics is expected to account for
5% of the value. Manufacturing companies in the West have started
outsourcing their logistics requirements. This
trend will soon catch up in India. Express companies such as Blue Dart and Elbee
Services are already into the logistics business.
Elbee is positioning itself as a total logistics
solution provider. The company provides logistics
solutions specifically tailored to meet customer
requirements. Blue Dart also provides customised
logistics solutions to meet the changing demands
of businesses. The distribution infrastructure these companies
have, in terms of warehouses, hubs, transportation
fleets and IT and manpower, makes logistics
a natural extension for their activities. Container Corporation (Concor), the public sector logistics service provider acts as a single -window service provider for all logistics and regulatory aspects (including customs and ports clearance before consignment reaches the point) related to transporatation of goods, mainly for Exim trade. It also deals with foreign shipping companies for further transit of outbound cargo. Concor has built an extensive infrastructure and systems in order to handle export-import and domestic cargo.
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