According to global rating agency Fitch, the Indian logistics industry is expected to grow from $80 billion in 2012 to $350 billion by 2015. This growth will be driven by the increasing volume of freight moved across the country by companies involved in industries like automobiles, pharmaceuticals, FMCG and retail. In order to cater to the demand from these sectors, the logistics industry is providing services like transportation, warehousing, freight forwarding, express cargo delivery, and container and shipping services.
Further, the majority of these logistics services are part of third-party logistics (3PL) services. Currently, enterprises outsource about 52 per cent of their logistics requirements, and 3PL accounts for only 1 per cent of logistics costs. The country’s organised logistics market accounts for 6 per cent of the total logistics market. Among the various services, transportation is the most important function of logistics. According to the World Bank 2010 report, logistics costs in India are estimated to account for about 13 per cent of the country’s GDP, which is fairly high as compared to other major economies. For example, logistics costs in the US and Europe account for 9.5 per cent and 7.15 per cent of the GDP respectively.
In order to reduce the high associated costs, logistics companies are increasingly using telecom as a tool to streamline their businesses. The key objective of using telecom tools and solutions is to maximise existing resources and ensure timely service roll-outs. Therefore, logistics companies are implementing telecom solutions to strengthen various aspects of the supply chain including planning and implementation. To support and handle the huge load of information and data, logistics companies need a robust telecom backbone. Players are using this backbone to support their internal and external communications network, manage various supply chain tools, and analyse the large database available to them.
Typically, logistics companies’ telecom networks comprise communication mediums like leased lines, VSATs, MPLS, Wi-Fi and radio frequency. Companies have deployed leased lines to accommodate the network traffic load and provide connectivity between two end-points. VSATs are being used by logistics companies to access remote areas and services like videoconferencing, email, the internet and voicemail.
Leading logistics companies are also dependent on telecom solutions to analyse the high volume of data available to them. This includes data related to load planning, freight tracking and billing. Further, as part of fleet management services, these companies use telecom solutions for supporting warranty claims; and addressing issues related to licence, taxes and various permits.
These players have also deployed standard IT tools like enterprise resource planning (ERP) and customer relationship management (CRM). An ERP system helps in managing processes, resources and information across verticals. Built on a centralised database and a common computing platform, an ERP system integrates all aspects of the enterprise. It helps in managing both internal and external resources, and facilitates efficient information flow across business functions within an organisation. It also allows players to effectively control their administrative and operational environment. The use of a web-based CRM system helps organisations to deliver an enhanced customer experience. Currently, major logistics companies have stand-alone CRM systems, including sales, marketing and services systems. A few of these systems are often connected with back-end systems for functions like order fulfilment. Companies also use various IT systems for functions like customer billing, generating invoices and general accounting. Further, logistics companies use internally developed IT software for functions like forecasting and budgeting, and management and operational reporting.
tele.net carried out a survey among logistics players to assess their telecom requirements and solutions.
The following questions were asked in the survey:
• What are the organisation’s key technology requirements?
• What is the mix of service providers and vendors used?
• What are the biggest concerns with respect to telecom infrastructure?
• What are some of the mobility and enterprise applications implemented by the organisation?
• Which network security tools has the organisation implemented?
• What redundancy tools are being used?
• Which new product or service holds the most relevance for the organisation?
Key technology requirements
According to the survey, telecom is being used as a means to improve supply chain management by the logistics industry. For a logistics company, creating seamless global platforms and innovative integrated services, improving customer experience with a single point of contact and ensuring cross-unit integration are critical. To ensure this, most companies have established a robust and flexible communications network.
The most widely deployed technologies are optic fibre networks, radio communication links, leased lines, MPLS, Wi-Fi, VSATs, ISDN lines, virtual private networks (VPNs), person-to-person networks and IP-SEC tunnels. Wireless technologies are primarily used for last mile access.
Meru Cabs, for instance, has opted for leased lines, which have built-in redundancy. The medium connects the company’s operations in each city to the central data centre in Mumbai. These leased lines are a combination of 2 MB and 45 MB links. The company has opted for three last mile technologies, which are deployed based on the location of the offices. In most cases, an optic fibre network is used for last mile access. Other locations use copper or wireless technologies.
Similarly, construction major Sobha Developers uses leased lines as links for its metropolitan area network and wireless technologies as last mile access solutions. Also, retail major Wynn Telecom Limited’s (WTL) telecom set-up currently comprises a leased line of 3 Mbps and a backup leased line of 1 Mbps. According to the respondent, this set-up offers WTL always-on connectivity, which supports bandwidth-hungry applications. At the same time, being a cost-effective connectivity option, it helps the company trim overheads. Moreover, this medium has enabled WTL to select from a variety of bandwidth and to customise its broadband package.
Meanwhile, companies such as the Punj Lloyd Group (PLG), Blue Dart, Blazeflash, the Kandla Port Trust (KPT) and DTDC have deployed a multi-tiered telecom set-up. PLG uses an international MPLS set-up and a secure VPN link for its mobile users. These mediums are used in conjunction with an optic fibre network, an IP-SEC tunnel and a person-to-person network. This multi-tiered infrastructure is used to connect personnel in various geographic locations and time zones to seamlessly connect to the group’s corporate network.
DTDC has opted for a mix of leased lines, mail servers such as Lotus Notes and Outlook Mail, EPABX and a local area network set-up. Blazeflash uses multiple computer terminals connected by dedicated leased lines, VSATs and microwave links. The company’s email server can be accessed from all locations. It also uses handsets, radio sets and pagers to stay connected with its workforce.
Similarly, KPT uses DLC (local loop and NLD) the internet, VSATs and ISDN lines. DLC offers high bandwidth, which allows faster data downloads; and voice, data and video streaming. In addition, DLC local loop offers permanent, reliable and high speed connectivity. Also, it is a cost-effective solution and supports heavy data traffic on the network. The medium helps in prioritising traffic as information and bandwidth-hungry applications are used on a daily basis. For last mile connectivity, KPT uses DSL and wireless connectivity through Wi-Fi.
Some companies have also established a data centre. For example, Simplex Infrastructure Limited (SIL) set up its data centre in 2005 to ensure server uptime, data recovery and backup, and for storage management as well as hardware and network operations. The company’s branch offices and project sites are connected to the data centre through various mediums. These include MPLS-VPN, VSATs, internet leased lines and internet broadband links. Users connect to the company’s leased line network through an SLL-VPN set-up. Bandwidth allocation for each medium depends on the number of users.
Apart from standard connectivity mediums, logistics companies have de-
ployed several IT tools. For instance, Usha International Limited uses SAP for all critical operations. The company also uses the SAP ECC 6.0 enterprise application, which comes with several add-ons, including the advance planning and optimisation, business intelligence, employee self-service and dealer management system modules.
Similarly, multiple IT applications and platforms are being used by Meru Cabs – ERP, CRM and dispatch systems. These function on the company’s last mile links. ERP has facilitated seamless data and information flow across the company, thereby integrating all critical processes on to a single platform. More importantly, this business support system maintains an integrated database for operations related to supply chain management, financials, expansion projects and human resources. “The CRM model has helped in managing interactions with customers, thereby improving sales prospects. It involves using technology to organise, automate and synchronise business processes, primarily for sales, marketing, customer services and technical support,” says the respondent. The CRM module is aimed at identifying and adding new clients while retaining existing ones and reducing the costs associated with marketing and client service.
Service providers and vendors
Companies in the logistics space use a mix of telecom operators and IT vendors including Bharti Airtel, Tata Teleservices Limited, Vodafone India, Microsoft, Bharat Sanchar Nigam Limited, Mahanagar Telephone Nigam Limited, Reliance Communications, Tata Communications, Tulip Telecom, Tata Teleservices (Maharashtra) Limited, Symantec AntiVirus, SCCM, Checkpoint, HCL Comnet, Oracle, Spectranet, McAfee and IPS.
Key issues and concerns
Identifying and implementing the latest technologies, performance of the selected vendor, ensuring system maintenance and network downtime, and fine-tuning existing processes are the major issues faced by these companies.
For WTL, fine-tuning processes to support enterprise applications and implementing new software involved several challenges. The company also faced resistance from its employees while deploying new technologies.
Meanwhile, the unavailability of uniform GPRS coverage and systems, products and processes for the transportation industry are key issues for Meru Cabs. Another challenge is ensuring a compatible environment to incorporate in-cab technology platforms.
According to the respondent from Mahindra & Mahindra Limited (MML), providing access to reliable and secure information across locations and the lack of connectivity in certain areas are the major challenges. “As our global presence is growing, we need to provide secure and reliable information anywhere, at any time. So, it is essential to extend the network to new locations, monitor or upgrade it and open it up to partners with appropriate security. User expectations in terms of uptime, response time and problem resolution are also increasing. Therefore, redundancy is factored into several components of the network,” the respondent says.
Mobile and enterprise applications
Enterprise applications used by logistics companies include audio-, web- and videoconferencing; email; web hosting; instant messaging; toll-free services; and VoIP.
In terms of mobile applications, these players use mobile email, mobile data connectivity, corporate intranet, conferencing solutions, push alerts, mobile access to supply chain management, CRM slutions, and vehicle tracking.
MML has deployed several mobility applications to provide real-time information to stakeholders including mobile employees and field staff interacting with various dealers. Mobility applications help in providing the field and mobile staff access to employee services and portals through their mobile handsets.
Network redundancy
Several mediums are being used by the surveyed companies for network backup. For example, Blazeflash has established two alternative backup systems. Also, the company uses a parallel MPLS network for its VPN set-up, as the latter provides patchy connectivity at times, leading to network downtime. In this case, the parallel network can be utilised immediately.
Network security
Securing the telecom network is a top priority for these companies. To this end, they have deployed multiple technologies. For example, KPT uses three security mediums – access log, security audits and firewalls – to secure the network. Security audits were undertaken to evaluate the safety of the company’s information system by assessing its conformity with a set of established criteria. Also, firewalls protected the network from external users.
The way forward
Going forward, most logistics companies have prepared a plan to upgrade their communications network. Sobha Developers, for example, is looking to deploy multiple mobile applications to improve its customer reach. These applications would provide customers updated information about the company’s projects. It plans to strengthen its network security set-up by introducing a two-step authentication process for the VPN network. Meanwhile, Madhya Pradesh Poorv Kshetra Vidyut Vitran Company Limited plans to introduce ERP, the Oracle CCNB application and supervisory control and data acquisition system.
Net, net, a responsive and efficient telecom infrastructure has helped companies in the logistics space to consolidate their business operations and reach out to their customers.