Logistics in Indian Manufacturing Scenario

Published by MBA Skool Team, Published on September 01, 2014

What do we mean when we say Logistics, say logistics team in a manufacturing set up – what is their objective?

Logistics, broadly speaking, is to get the right material at the right place and at right time, while minimizing total operating costs and satisfying a given budget constraints. Cost of logistics (transportation alone) costs 2-3% of the operating expenses*. While the loss due to a break in the logistics chain is very large in magnitude and has often result in loss of business, trust and even lives.


For instance, Linde India ltd, Ahmedabad supplies lifesaver oxygen cylinders to various hospitals in an around. We can imagine the criticality of transportation because cyclinders will require a 2 day lead time for refilling and holding capacity will be limited due to constrains like space, cylinder quantity etc. Hence, right time, right quantity and place is very significant here. Similarly, pharmaceutical companies also require a robust supply chain and logistics arrangement. Speed of supply and accuracy can be a lifesaving factor. Similarly, in any company, we can understand the importance of feeding right material at right time. Especially, in a make to order company, where there is no scope for carrying inventory, logistics plays an important role.

CDC,RDC : Central/Regional distribution centres.

However, as presumed by many, Logistics is more than merely shipping and receiving, not just traffic or warehousing. It is that part which interface with external agencies of business partners.  Hence let us view few key areas to focus for effective logistics management:

1)    Movement or flow of the product in the Supply chain should complement with the company strategy .At any decision level, it being in line with the company objective predefined will play an important role to establish a consistency throughout the operation.

2)    Movement of information, tracking, update to the concerned  is another vital area. Because, this is the parameter that can enable sound decision making , maintaining speed and accuracy of the flow.

3)    Time/Service – the logistics setup should be able to respond to the market dynamics and provide competitive service to external/internal customers.

4)    Cost of service – a vital factor and constraint while achieving the above , always should be kept under control .

5)    Integration and collective working of all to fulfil and exceed customer expectations. Collective responsibility and team work of all partners, warehouses, transporters involved in the chain is a must, for success in the long run.

Where we stand now:

The LPI(logistics performance index ) of India is 54.

Obviously, this cannot support the present govt’s “Make in India” offer to manufacturers. But with the rise of e-commerce and a competitive global environment, we can hope for simple taxation and implementation of GST to enable uniformity  as well as loosen the burden on logistics cost. This will be part of the improvements expected from inflow of FDI and FII ,especially in manufacturing,infrastructure and rise of e-commerce . Therefore, we must be prepared with objectives and roadmap to  increase position in the LPI table while achieving most effective logistics  services.

The article has been authored by Papu Chetry.

Reference  :

  1. McGraw.Hill.Strategic.Supply.Chain.Management –
  2. www.worldbank.org
  3. www.google.com

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