Factor That Influence Or Affect The Logistic Industry 66381g

Factor that influence the logistic and supply chain industry Vidyasagar Tiwari MMS-A 57 Thakur institute of management studies and research

Abstract For any Manufacturing house to be successful, there logistics system is very important to ensure that products get to the consumer in time, in good condition and at the minimum cost possible. Despite much effort by manufacturing firms to ensure that their logistics systems are efficient, many customers still experience delays for deliveries, which show that logistics performance performs short of customer expectations in most companies. Various factors may cause adverse effect on the expected performance of logistics system. This research project seeks to identify these factors and also determine in what way they may influence d logistics performance on the basis of secondary data and research. Keyword: 3PL, Cost, Influence, Factor, Logistics, Technology, Ecommerce, Transportation.

Introduction The council of logistic management defines logistics as “that part of supply chain process that plans, implements, and controls the efficient, effective, forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer requirement”. In ordinary language the same can be defined as right product, at the right place, in right time, and in right condition. India recently faces down in every industry because of demonization. Demonization also affected adversely to logistics industry because maximum percentage of this industry work on cash. This research paper is for to study of other factor that affect positively or negatively logistics industry like cost, technology, 3PL and transportation. As the logistics plans very important role in supply chain management of any industry who try to delivery any kind of product to their customer. Distribution cost is plays very important role in logistics industry because its increase the price of product and extra cost on company if they don’t increase the product price. Different location of the warehouses also plays very important role because this effect distribution cost. The emerging new technologies are creating strategic opportunities for the organizations to build competitive advantages in various functional areas of management including logistics and supply chain management. However the degree of success depends on the selection of the right technology for the application, availability of proper organizational infrastructure, culture and management policies. In logistics, information, communication and automation technologies has substantially increased speed of identification, data gathering, processing, analysis and transmission, with high level of accuracy and reliability. Technology is a means to enhance business competitiveness and performance. It plays a major role in success of supply chain by enhancing the overall effectiveness and efficiency of the logistics system. In logistics many new technologies are used in developed country while in India adoption process is very slow. However due to liberalization of the Indian economy the competitive

pressure is building up and the only option to face the competition in to go in for technology enabled operations. Efficiency and effectiveness can be achieved through the development of relationships with 3PL service providers by avoiding additional investments. Again, this allows the respective firm to focus on their core activity. Additionally, uncertainty and frequent change in the business environment, stiff competition, the need for continuous cost cutting leads to overall restructuring of supply chain strategies. This eventually s the motive for 3PL alliances. Transportation is one of the most important elements in determining an organization’s overall logistics costs. Companies are constantly trying to figure out the most efficient and costeffective way to get their products from Point A to Point B.

Objective 

To understand the effect of cost factor in logistics

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To understand the effect of technology factor in logistics

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To understand the effect of 3PL factor in logistics

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To understand the effect of Transportation factor in logistics

Literature Review (Kim & Kim, 2006) Has evaluated the factors affecting logistics customer service performance in the context of car manufacturing sector. This study in drive by two research methodology first is literature survey and personal interviews and second is empirical investigation of the Korean car manufacturers’ distribution channel performance. based on analysis of the model, paired t-test shows important variables affecting distribution channel performance and offers insight into how to better manage the distribution channel to achieve high customer service level with low cost. (Nadarajah, 2015) Examines the influence of specific investments, opportunistic behaviour, prior satisfaction, 3PL reputation, reciprocity and communication on outcomes of third-party Logistics performance, and the extent to which trust affects these relationships. based on the research framework and set of questionnaire he conclude the influence of the six independent variables (Communication, Reciprocity, 3PL Reputation, Prior Satisfaction, Opportunistic Behaviour and Specific Investment) are important in creating positive impact on 3PL performance competitive priorities consists of asset reduction, channel and operations performance. (George & Dr. Mike Iravo, 2014) Various factors that affect the performance of distribution logistics are Customer, the product, technology and distribution structure are all factors that affect the performance of distribution logistics other factor like customers’ location, ordered quantities, customer requirements and the number of customers are all customer aspects that affect the performance of distribution logistics. On product related factors affecting DL

performance, majority of the respondents were agreeable that the weight of products, product shape, unitization of product and product range are all factors that affect DL performance with most respondents strongly agreeing on all the four factors.. According to the research findings, availability of regional depots and the mode of transport as factors affecting DL performance, majority of the respondents were agreeable that they are. (Suthikarnnarunai, 2009) study indicated that the logistics cost of the steel industry was according to the principle of supply chain and logistics management theory and also relied on other economics factors such as oil price, the number of labour, interest rate, and exchange rate, etc. Cost and time reduction in supply chain by reducing the non-value added activities, planning effective transportation, increasing the effectiveness of predicting the demand in relevant to the need of customer and transportation plan, and developing the information technology system to link and exchange information within organization, between organization, and between government sector and entrepreneur. (Matopoulos, Vlachopoulou, & Manthou) E‐business adoption and impact are caused by increased operational compatibility, as well as increased levels of collaboration. By conducting in‐depth interviews in eight companies he concluded that business on logistics processes mainly refers to time reductions and quality improvements, not just cost reductions. Companies are more likely to realize improvements in cycle time reductions and process quality. (TSENG & TAYLOR, 2005) Inter-relationship between transportation and logistics systems through collecting and analysing various application cases and practices. Instance the increase of the efficiency of logistics also would bestead to release traffic load in the urban areas. Transportation is the base of efficiency and economy in business logistics and expands other functions of logistics system. Good transport system performing in logistics activities brings benefits not only to service quality but also to company competitiveness. (Ndonye, 2014) Relationship between the components of information technology namely; information flow, logistics integration, Inventory management system and fleet management system with logistics performance. By set of questionnaire to operation manager he conclude that information technology is well utilized in the cargo transportation sector in Kenya to improve the efficiency and effectiveness of the logistics function (kenyon & Mexiell, 2012) Outsourcing logistics activities slightly increased COGS, but the existence of moderating factors suggests interesting new strategies for outsourcing the logistics functions. Research contributes to the understanding of the conditions that success when outsourcing logistics. A key finding is that first order effects are few, so moderating and contextual factors are paramount to success in manufacturing cost performance.

Research Methodology Type of research Type of research is pure research, intention of this research is just to gather knowledge about the logistics industry and factor may effect this industry positively or negatively. Research is for just sake of in-depth study of about logistics industry. Data collection Data is purely based on secondary type of data and collected from different research paper, website mainly from internet. Data Analysis as the data is mainly collected form secondary sources hence there is no such mathematical and analytical tool has been used for data analysis. only different graph and table has been used to show some number and interpretation of those to simplify the data to understanding.

Different cost associate in logistics industry Total logistics costs consider the whole range of costs associated with logistics, which includes transport and warehousing costs, but also inventory carrying, istration and order processing costs. istration and order processing costs are relative to the total volume being handled. However, for the same volume being handled transport and warehousing costs will vary according to the distribution strategies being adopted

Figure 1 Different cost in logistics industry

Figure 2: total sourcing of cost Total logistic costs reveal much about the locational dynamics of logistics activities particularly distribution centers, since they indicate the weight of most important factors. Transportation costs remain the dominant consideration as they for about half of the logistic costs. Inventory carrying costs are also significant with a share of about one fifth of total costs. They include the costs of holding goods in inventory (capital costs, warehousing, depreciation, insurance, taxation, and obsolescence) and are commonly expressed as a share of the inventory value. Labour costs involve the physical handling of goods, including tasks such as packaging and labelling. Customer service encomes receiving and processing orders from customers. Under such circumstances, distributors are willing to pay higher rents to take advantage of a logistics site that offers co-location with an intermodal terminal since this strategy enables them to reduce transportation costs, such as drayage, as well as improve their time responsiveness (lead time). Therefore, while transportation costs remains the most important element of logistics costs and its friction, non-spatial components such as inventory carrying and labour costs, are significant components that will influence locational choice depending on the supply chain. Reducing logistic costs is often the number one priority for a businesses’ bottom line. There are many methods that can help improve supply chain processes and in turn save business money. Methods of reducing logistic costs can range from optimizing inventory levels, to recharting better shipping networks, to creating better processes, to improving supplier/third party relationships and so on. 1. Increases storage density in bins & racks by improving vertical space utilization or bin reprofile as a means to achieve it2. Decreases freight costs through better truck utilization in both full. 2. Decreases freight costs through better truck utilization in both full (FTL) and less than (LTL) truckload shipments. 3. Reduces damage to case picked pallets by eliminating movement in transit.

4. Better utilizes available floor-space to increase storage density. 5. Encourages organized operations, which directly linked to labour, efficiency, asset utilization, and inventory accuracy. 6. Solicit from their clients or tap into their company’s’ knowledge base. Based on their past business demands and supply needs define what is of most value to their customers. 7. Continuous mechanics or tools must be put in place like the PDCA (plan–do–check–act or plan–do–check–adjust) the Deming cycle.

Transportation and Different modes of Transportation It is virtually inconceivable in today’s economy for a firm to function without the aid of transportation. Transportation is an essential and a major sub-function of logistics that creates time and place utility in goods. In fact, the backbone of the entire supply chain is the transportation management that makes it possible to achieve the well-known seven R’s- the right product in the right quantity and the right condition, at the right place, at the right time, for the right customer at the right cost. Micro Logistics and Macro Logistics Transportation decisions affect the other sub-functions, and there is a close linkage between them. Hence, transport decisions cannot be made in a vacuum. This part of the role of transportation in logistics may be termed as “Micro Logistics,” where at the firms’ level; the companies optimize this function for competitive cost advantage. The importance of transportation should also be seen by looking at the impact of transportation on a country’s economy. Studies reveal that in India the total logistics costs constitute nearly 10 percent of the GNP out of which nearly 40 percent is because of transportation alone. In the U.S., the estimates show that the cost is around 6 percent of the GNP. The major infrastructure required for moving goods from one place to another in India involve the active roles of Roads, Road Freight Industry, Railways, Ports and Shipping, and Pipelines, all of which are either managed or regulated by the government. The efficient and effective management of this infrastructure to enable the smooth flow of goods constitutes “Macro Logistics.” The situation in India is that because of unprofessional management of “Macro Logistics,” the industries are not able to derive the best out of their “Micro Logistics.” Any improvement in the Micro Logistics will be effective only if the Macro Logistics is effective. Also, Indian companies and the industries have not fully optimized their logistics function, as there is a tendency to live with the lacunae in Macro Logistics and the government’s inefficiency. The objective of this article is to put forth the Macro perspectives in Indian transportation logistics, the scenarios in the infrastructure, which constitute Macro Logistics in the country, and possible remedies. Modes Transportation modes are an essential component of transport systems since they are the means by which mobility is ed. A wide range of modes that may be grouped into three broad categories based on the medium they exploit: land, water and air. Each mode has its own requirements and features, and is adapted to serve the specific demands of freight and enger traffic. This gives rise to marked differences in the ways the modes are deployed

and utilized in different parts of the world. More recently, there is a trend towards integrating the modes through intermodality and linking the modes ever more closely into production and distribution activities. At the same time, however, enger and freight activity is becoming increasingly separated across most modes. Roads In India, 60% of freight moves on the road network, most of which includes very slow, poorly kept infrastructure. Less than 5% of the road network in India includes national highways. The sector is highly fragmented with 75% of truck owners operating less than five trucks each. The trucks themselves tend to be in poor condition, with an average age at 10 years. Additionally, there has been very limited adoption of tracking and fleet management technology, which is a potential opportunity for U.S. businesses. Other issues with the road network include lack of coordinated planning, intrastate border issues, cumbersome documentation, and the average vehicle speed of just 13 miles per hour due to heavy road congestion and traffic. As a result, the average truck in India covers only about 125 miles per day versus double that figure in larger developed countries. The Government of India has plans to improve India’s road network. For example, the trip from India’s largest port near Mumbai (JNPT) to New Delhi, a very important freight route, takes 17 days. The Delhi Mumbai Industrial Corridor (DMIC) project promises to reduce this time to just 17 hours. Throughout India, planners are moving toward an integrated concept of building transportation corridors and connected urban areas to deal with logistical and population challenges between and within the major cities. Seaports There are 13 major ports (national government control) and 187 minor ports (local state/private control) across India’s extensive, 4,500 mile coastline. These ports are overloaded, which results in shippers turning to ground transportation via road networks. The average containers handled per ship per hour in India is 18, as compared to 28 internationally. Yet overall export-import cargo at Indian ports is projected to increase by over 200% in the next seven years. The Government of India has plans to address this problem by increasing India’s port capacity from one billion tons to 3.2 billion tons by 2020. Major and minor ports have formulated plans for developing new terminals, upgrading existing berths, and modernizing operations by including state of the art cargo handling equipment and tracking systems, by deepening channels, and by widening roads - all areas in which U.S. companies can find business opportunities. Additionally, the majority of cargohandling equipment at Indian ports was commissioned long ago and has outlived its life span, adding wait times at ports and increasing the price of shipping dramatically. Rail India’s rail network is the fourth largest in the world and second largest under single management. But due to under-investment, most freight ends up on the less efficient road network rather than the somewhat quicker rail lines.

The average freight train speed in India is 15 miles per hour as compared to 85 miles per hour in the United States. In India, the priority of trains is the opposite of that in the United States – Indian enger trains have the right of way over freight trains, further slowing down cargo transportation. But even with these issues, rail remains one of the fastest and cheapest ways to ship goods in India. India is slowly but surely implementing its Dedicated Freight Corridor plan, improving connectivity in two separate stretches on the eastern and western sides of the country with dedicated freight lines, spanning approximately 2,000 miles. As this project comes to fruition, U.S. companies may find good opportunities for their products and technology in signaling, construction equipment, and more. Airports The most overlooked element of supply chain logistics in India is air cargo. With a GDP of about $1.67 trillion, India handles just 2.5 million tons of cargo by air. Historically, India’s airports have been built and managed primarily to handle enger traffic rather than a combination of cargo and engers. But air cargo traffic is expected to grow as India builds new airports and improves existing ones in tier 1 and tier 2 cities. Newer airports are being built with better connectivity for air cargo, finally making it a viable option for the movement of goods. Cities like Pune and Ahmedabad in Western India and Kochi in the South have seen sizeable increases of in air shipments over the last 10 years and are leading the charge in this sector for tier 2 cities. The Indian government continues to increase investment in the airport sector with each 5year plan. The last two plans saw an increase in combined public-private funding of approximately 400% and 85%, showing the government’s commitment to improvement in this area. The entry into the market of third-party logistics companies such as FedEx should help to maintain the momentum in India to continue to upgrade and invest in air cargo terminals. This creates opportunities for companies that make equipment and technology for air cargo handling and processing. Cold Chain Cold chain is a critical component of the logistics sector in order to preserve perishable items and normally consists of pre-cooling facilities, cold storage units, refrigerated carriers, and warehousing. Emerging segments include ready-to-cook, ready-to-eat, and ready-to-serve foods, followed by the ice cream industry. Cold chain products and technology should see major growth in India in the coming decade. This highly-fragmented industry of over 3,500 companies is estimated to be as large as $2.78 billion, and is expected to grow to $7.41 billion by 2016. India is the largest producer of fruits and second largest producer of vegetables in the world, with total production of 63.5 million tons of fruit and 125.89 million tons of vegetables per year. India is also the largest producer of milk in the world. Approximately 30,000 refrigerated vehicles are on the road in India, mostly operated by small, non-integrated firms to transport milk. But very little cold chain exists for other products. As a result, India wastes a

staggering amount of food, somewhere between 30 and 40% of production. Even though India is the top producer of vegetables worldwide, it represents just 1% of world exports. The Indian government and industry are attempting to improve the situation. In 2011, the Government of India introduced a customs duty exemption on items such as refrigeration units, A/C equipment, refrigeration s, and conveyor belts. It also set up “Mega Food Parks” and provided tax benefits on investments in the cold chain sector. According to the latest reports, the cold chain market in India will grow at the compounded annual growth rate (CAGR) of 28% from 2012 to 2017, which will make the sector worth $11.6 billion. Transportation is one of the most important elements in determining an organization’s overall logistics costs. Companies are constantly trying to figure out the most efficient and costeffective way to get their products from Point A to Point B. What factors and trends determine the best way to deliver your products? What factors influence freight demands? Here are some of the factors that play into a company’s decision making process and/or transportation demand:  

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Shrinking capacity: The economy, the driver shortage, government regulations, and other factors are tightening capacity in the freight industry. Tightened budgets: When looking to trim costs and improve profitability, companies tend to look at transportation as one of the first functional areas to save on costs. Economy: Trends or changes in the national or regional economy affect the manufacturing and distribution process therefore affecting the demand for transportation. Developments in technology: Technological developments have streamlined and increased the productivity of company operations, created efficiencies for drivers and optimized the overall freight management process. Lead time: Advanced lead time notice can be tremendous in affecting a shipper’s freight spend. It is advantageous for shippers to make sure that their internal functional areas are clearly communicating as to when product will be ready to ship. In turn, giving as much advance notice as possible to your 3PL or carrier will help reduce your shipping costs. Ample lead time could also provide you with different modal options such as rail or barge which could prove to be much more cost effective. Load time: In today’s market and with tougher government regulations, carriers want to be as efficient as possible. Load time is a critical role in the shipping of your products. Equipment type: Consider the best type of equipment to move your product. Deferring to a particular type of equipment to ship your product could very well affect your bottom line freight spend. It could be more cost effective to use a specific type of equipment. Driver-friendly facilities: It is becoming a more common practice of shippers these days to provide “driver-friendly” facilities. Encourage your team to communicate, work with and show drivers respect. Be more efficient with load times. Some facilities are maintaining driver break rooms to include showers and vending

machines. All of these factors and more are contributing to stronger relationships between shipper and carrier.

3PL logistics The 2017 21st Annual Third-Party Logistics Study shows that shippers and their third-party logistics providers continue to move away from primarily transactional relationships and toward meaningful partnerships. Since the study began 21 years ago, researchers have seen the continued improvement in the strategic nature of relationships between shippers and third-party logistics providers. This year’s survey suggests 3PLs and their customers continue to improve the quality of their relationships. Both parties—91% of 3PL s and 97% of 3PL providers—reported that their relationships are successful and that their work is yielding positive results. The 2017 3PL Study showed that 75% of those who use logistics services (shippers) and 93% of 3PL providers said the use of 3PL services has contributed to overall logistics cost reductions, and 86% of shippers and 98% of 3PL providers said the use of 3PLs has contributed to improved customer service. Moreover, the majority of both groups—73% of shippers and 90% of 3PL providers—said 3PLs offer new and innovative ways to improve logistics effectiveness. The topic of alignment remains relevant, and shippers and 3PLs agreed on the importance of openness, transparency and effective communication to overall success. Among respondents, 44% of shippers and 86% of 3PL providers agree that collaborating with other companies, even competitors, to achieve logistics cost and service improvements holds value. This year’s results show that as 3PL offerings mature, shippers are increasingly taking advantage of logistics providers’ expertise. Again this year the most frequently outsourced activities continue to be those that are more transactional, operational and repetitive. Activities that are strategic, IT-intensive and customer-facing tend to be outsourced to a lesser extent. However, even outsourcing in those categories is increasing over historical values. The IT services are becoming a differentiating factor that 3PLs use to their advantage. Shippers continue to rely heavily on the IT services that 3PLs provide, and the ability to manage the provision of IT-based services is a necessary core competency of 3PL providers. While the “IT Gap”—the difference between what shippers feel is important and their ratings of their 3PLs’ current IT capabilities—has stabilized, further opportunities for improvement remain.

Figure 3: Main components of 3PL (Research on India, 2009)

Technology innovation in logistics Innovation in logistics information systems is very important and tries to reinforce their ability of innovation. All logistics service providers place emphases on the innovation in logistics information systems. The factors influencing innovation in logistics information systems are divided into internal and external; the internal factor includes organizational encouragement and quality of human resources and the external factor includes the environmental uncertainty and governmental . These factors have positive influences on the innovation in logistics information systems for logistics service providers. Moreover, organizational encouragement, quality of human resource and governmental exhibit significant influences on the innovation in logistics information systems for the logistics industry. Innovation in information systems for logistics service providers, logistics companies can plan better strategies to construct their technological innovation systems and make them become innovation-based logistics service providers. Logistics service providers can improve their innovative ability in information systems by training and educating their employee to become high quality of human resources. The logistics companies and their leaders should also provide better and resources to encourage technological innovation. The government should give strong for logistics industry in adopting information systems. The innovation will be reinforced for logistics companies if the government can provide various s of innovation resources and continuous encouragement policies. The

government can provide financial incentives, pilot projects and tax breaks to stimulate innovation in logistics information systems for logistics industry.

Impact of IT on functions of logistics and supply chain management are as follows

 Procurement: In the initial period the procurement process in the organization was done by a separate department on the basis of least price from the supplier. In the next generation with the advent of IT the E-procurement is done where online auctions are conducted and strategic relations are forged with good suppliers by long term contracts and relationships.  Planning: In the initial period before the advent of IT, production and distribution planning was done based on historical data. There was not much linkage with business planning and production changed with varying demand. However with the advent of IT planning approach include collaborative planning, forecasting and replenishment (RF). It involves long term commitment to information sharing for collaborative planning purposes like t business planning (SKUs, brands) and financial planning.(sales, inventory, safety stock, pricing, fill rate).  Web-based Collaboration: The web-based collaboration application enables to share and collaborate with supply chain partners on forecasts, replenishment and promotions plans to deliver the highest level of customer service and profitability.  Scheduling: In the initial period the scheduling was done to improve asset utilization and reduce manufacturing costs. However with the advent of IT strong linkage is established between supply chain partners and customers. As such scheduling is done to serve the customer at the right time.  Inventory Management: In the initial period every department tried to minimize the inventory by transferring it to the next level of the supply chain. Thus the total inventory cost in the supply chain was high as there was no transparency of the inventory held in the supply chain. However with the advent of IT, techniques such as collaborative replenishment and vendor managed inventory were followed where manufacturer takes the responsibility to replenish the distributor inventory, resulting in inventory control and access to demand information.  Logistics and warehouse Management: In the initial period logistics was more manual intensive and there was no visibility of the movement of goods. However due to the advent of IT and technologies like RFID and GPS complete visibility in movement of goods is assured resulting into efficient logistic and warehouse management.

 Customer Service: In the initial period customer service was only reactive. The complaints or information was difficult to reach the concerned department and was time consuming process. However with the advent of IT, customer service is more proactive as it reaches the customer through internet and takes continuous from them.

Summary All four factor are interconnected to each other in logistic industry. cost, transportation, 3PL and Technology. cost is main factor in logistics.

Reference George, K., & Dr. Mike Iravo. (2014). Factors Affecting the Performance of Distribution Logistics among Production Firms in Kenya: A Case Study of Bata Shoe Company (K) Limited. kenyon, G. N., & Mexiell, M. J. (2012). Success factors and cost management strategies for logistics outsourcing . Kim, & Kim. (2006). factor affecting logistics . Evaluating factor affecting a logistics customer service in car industry, 20. kim, k. &. (2006). Evaluating factors affecting logistics customer service performance. Matopoulos, A., Vlachopoulou, M., & Manthou, V. (n.d.). Understanding the factors affecting e‐business adoption and impact on logistics processes. Nadarajah, G. (2015). Factors Influencing Third Party Logistics Performance in Malaysia: The Role of Trust as a Mediator.

Ndonye, S. K. (2014). Influence Of Information Technology On Logistics Performance In Kenya With Reference To Cargo Transportation. Suthikarnnarunai, N. (2009). Economics Factors Influencing Logistics Cost of Thai Steel Industry. TSENG, Y.-y., & TAYLOR, M. (2005). THE ROLE OF TRANSPORTATION IN LOGISTICS CHAIN.

Book reference Factors Affecting Transportation Logistics by James Shuler

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