Application of Chapter 5 Material INTERNATIONAL LOGISTICS: The Management of Int

Question

Application of Chapter 5 Material INTERNATIONAL LOGISTICS: The Management of International Trade Operations, 5th edition, by Pierre David

As a first step into the domestic Indian market your company decides to export products to India. Refer to the U.S. Government website - Doing Business in India and then discuss the pros and cons between hiring an Agent to represent your company in India or to using an Indian distributor. The link to Doing Business in India is provided below. You may need to go outside of Desire to Learn to activate it.

http://www.export.gov/india/doingbusinessinindia/index.asp

Doing Business in India

Explanation / Answer

A logistics partner big enough to deliver freight of any kind, to any place via air, road or rail, but capable of giving its customers the personal attention they need. We help our customers constantly improve their transportation networks and gain a competitive advantage, by giving them the means to get products to market faster and more efficiently. Our Logistics Services allow us to offer, Air Freight Services, Logistics Consultancy to our clients. We understand the importance of timely delivery while transportation, therefore, we provide these services to our clients in order to streamline their logistic operations. Our services can be executed as per the budget as well as the requirements laid by our clients.

Logistics is an integral activity for economic growth as it involves the management of flow of goods from place of origination to place of consumption. The sector comprises shipping, port-services, warehousing, rail, road and air freight, express cargo and other value added services. The global logistics market currently generates over USD 8 trillion annually and represents around 11% of global GDP.

The growth in Indian economy in past few years has resulted in a huge market for logistics services. The logistics industry employs over 50 million people in India. An efficient logistics partner can help improve operational efficiencies for any business by cutting cost and delivery time. This ultimately translates to market share and profits for the business.

There are various different types of logistics business that one can start. These include third party logistics (3PL), couriers and freight cargo services, air cargo services and warehousing services. Any logistics company needs to look into the following aspects to be successful.

Funding and Investment

The first step that any logistics company would need to take is to seek investment. Amount of investment in logistics business will depend upon the services that you wish to start. A simple brokering and freight management service will require less capital compared to a 3PL service. For example, to setup a freight forwarding service in India, you will require a capital investment of about $1-$2 million USD. A pure 3PL service will require investments ranging from $10-18 million USD. Starting an Inland Container Depot (ICD) or Container Freight Station (CFS) requires investments running into several hundred million dollars (USD).

It is important to identify the niche services that you wish to target and prepare an investment plan based on it. Finding investment in logistics is relatively simpler in India because of liberal FDI norms and active interest shown by large private equity players.

          Demographic profiles of Asian populations coupled with economic growth has triggered demand-led consumption. In Africa, critical positioning and access to natural resources is incentivizing investments in the region. Population density and ever-increasing aspirational requirements are leading large scale producers to migrate to these regions to build infrastructure and production facilities. Accordingly, trade movement has been increasing towards these regions to meet the growing demand and investments. 3. E-Commerce Wave

          The growth of e-commerce has given way to specific logistics channels handling only last mile deliveries. These channels ensure faster delivery and provide assured reverse logistics. They also insure for the consignee collection of payment. This model is a true 3PL (third-party logistics) service offering. With the complexity involved and the level of automation required, big e-commerce companies like Amazon and others have set up their own last mile delivery services and are now entering as fully fledged 4PL logistics service providers.

India's logistical costs as a percentage of GDP is on the higher side: 13.0% vs. global average of 11.7%. Logistics in India are plagued by an inefficient system, lagging infrastructure, lower average trucking speeds, congestion and bottlenecks in surface transportation, etc

hired aspect that one needs to look at is the business risk. In a developing economy like India, risk management plays a crucial role, more so for logistics business. Since the logistics business is very dynamic with multiple partners/vendors involved in the entire operation, risk of a claim is very high. It is important to cover liability by taking adequate amount of business insurance.

Many large insurance companies in India offer such insurance plans. Serious liability issues arise from cargo damage, theft, injury, environment damage etc. While business insurances help to address some of the liability concerns, they are not always very effective. For example, most Cargo and Property insurance in India will not cover inventory shortages as this is considered normal risk while running a 3PL business.

Hence it is very important to understand the risks involved before executing any contract.

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