Currently valued at over Rs 4,000 billion, the size of the Indian logistics industry (measured in terms of freight carried and storage capacity created) steadily increased over the past year. The road freight segment registered the highest growth.

Growth in the logistics sector can be attributed to a number of factors. To begin with, government initiatives such as allowing 51 per cent foreign direct investment (FDI) in multi-brand retail and 100 per cent FDI in single-brand retail has provided a significant fillip to the sector. Equally important was permitting foreign airlines to pick up a stake of up to 49 per cent in domestic carriers.

Moreover, significant growth has been registered in the end-user industry, as the government and investors have continued to focus on industries such as retail, food processing, automobiles, pharmaceuticals, engineering/electrical goods and consumer durables. Besides, the entry of foreign players in the sector has driven the demand for specialised logistics services. Another factor steering industry growth has been the increased demand for third-party logistics (3PL) services, as players are offering integrated solutions and value-added services to customers.

Going forward, the sector is expected to continue to grow. Industry reports suggest that the Indian logistics space will register a compound annual growth rate (CAGR) of over 15 per cent in the next four to five years. The 3PL segment, in particular, would witness a CAGR of over 20 per cent in the next two to three years.

Broadly, the trends witnessed in this sector over the past year include increasing consolidation, adoption of the merger and acquisition route by players that are looking to enter the market and expansion of existing product lines – over 25 deals were recorded during 2009-12. Moreover, the demand for integrated logistics hubs like multimodal logistic parks and mega food parks grew manifold during 2013.

Another notable trend has been a steady increase in the adoption of telecom tools. As per industry estimates, logistics players spend 0.2-0.5 per cent of their overall revenue on technology. In comparison, the global benchmark is close to 2.5 per cent of overall revenues.

According to a survey undertaken by tele.net, logistics players rely on a robust and flexible telecom set-up to add value to different elements of their supply chain. Broadly, these elements include transaction (related to order management); communication (exchanging information across locations, global sites and supply chain partners); and relationship (managing relationships between a logistics firm and its customers).

Therefore, a logistics player would adopt standard telecom tools like leased lines, VSATs, MPLS and Wi-Fi as part of its wide area network. Moreover, e-commerce and web-based solutions are finding several takers as logistics players need to streamline operations and business processes and meet customer expectations of timely deliveries.

Moreover, airports, freight forwarders, container freight stations, etc., are increasingly focusing on adopting technologies, especially tracking and tracing platforms; electronic data interchange (EDI), radio frequency identification (RFID) and the global positioning system (GPS).

Tracking and tracing systems are a link between a company’s existing system and its material flow. In India, tracking systems are utilised by the transport industry to ensure real-time tracking of their vehicles. The use of GPS in India, however, is limited – only 25-30 per cent of logistics players utilise this medium owing to the high cost of deployment.

EDI platforms are used by companies in this segment as they expedite reactions to customer requests; allow the provision of point-of-sale data from the entire supply chain at any point of time and eliminates the need for manual data entry. However, the use of EDI in India has been limited to established logistics players.

Despite the growing adoption of telecom in the logistics sector, there are several issues and challenges in their deployment. Technology is still considered an “expense” rather than a key differentiator for ensuring greater efficiency and productivity. Moreover, opting for the appropriate technology is a challenge, as most logistics players do not have in-house expertise. Other major challenges are the lack of skilled personnel and changing the employee mindset to work with technology.

In all, the use of telecom in this sector is increasing, driven by the increasing demand for diverse logistics services and the need to integrate various processes.

tele.net surveyed various logistics companies to assess their telecom-related priorities and current communications networks, and the challenges faced by them and their future plans. The following questions were asked in the survey:

•What are the organisation’s key technology requirements?

•What mix of service providers and vendors is used?

•What are the biggest concerns with respect to the telecom infrastructure?

•What are some of the mobility and enterprise applications implemented by the organisation?

•Which network security tools are used?

•Which redundancy tools are used?

•Which new product or service is of relevance for the organisation?

Key technology requirements

The results of the survey suggest that the telecom-related priorities for such companies is to gradually shift towards four major technologies – cloud computing, big data, mobility solutions and machine-to-machine communications.

The basic idea is to capture data and information from each location in real time, while building a seamless and transparent digital platform to support every component in the overall value chain. Moreover, according to industry analysts, telecom plays a three-pronged role in a logistics company – it works “inwards” to improve a company’s internal processes and structure; “outwards” to streamline external communications; and “across” to improve a company’s overall processes and relationships with its business partners.

Keeping this in mind, most respondents have a multi-tiered communications infrastructure in place. While technologies such as cloud computing are coming into play in a big way, companies with a large logistics set-up still rely on standard telecom tools and technologies for their wide area network infrastructure.

To illustrate, Apollo LogiSolutions Limited (ALL) has deployed NEC’s IP EPABX infrastructure, which supports platforms such as session initiation protocol, the primary rate interface, digital and analog lines, the voicemail service, the “Meet Me” conferencing tool, IP telephony, fax to email and email to fax facility and IP audio- and videoconferencing. The WAN components of ALL’s telecom set-up include dedicated managed MPLS lines, used for connectivity to the company’s branch offices and warehouses. This set-up is managed centrally from the company’s head office.

Meanwhile, DTDC has opted for a mix of leased lines; mail servers such as Lotus Notes and Outlook Mail; EPABX; and a LAN. 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.

According to the Centre for Railway Information Systems, the Indian Railways (IR) has established electronic data centres, which are being used for payroll and financial applications. They are connected to LANs in each railway office through the Railnet network, which functions on the railways’ and RailTel’s optic fibre cable backbone and copper networks for last mile connectivity. Meanwhile, the logistics major’s passenger reservation system uses a core network of 64 kbps leased lines for connecting the central servers to provide ticketing services. IR’s current ticketing network is a resilient and hierarchical two-tier IP network. All ticket counters for reserved and unreserved ticketing systems are connected via Ethernet and 2 Mbps leased lines to the central servers, which are connected through a core network of leased lines.

For other players such as Mahindra & Mahindra Limited (MML), moving towards a cloud computing-based platform is a priority. This is because the company is deploying an increasing number of office-related applications. “A few applications on our network are cloud based and this helps us integrate voice, data and video technologies on the same platform,” says the respondent.

A number of IT tools have been deployed in tandem with these telecom tools. As per the survey, enterprise resource planning (ERP), customer relationship management (CRM) and SAP are the most widely used software applications. For instance, the Konkan Railway Corporation (KRC) has deployed ERP and CRM. ERP helps KRC to automate and link its business processes. In other words, the package helps in synchronising data and information across multiple systems. KRCL can, therefore, standardise and reduce software requirements for multiple processes. Similarly, CRM helps the company track and organise its contacts with its current and prospective customers. The software supports the entry, storage and provision of information about customers and customer interactions for employees.

Some companies have deployed several other software platforms. For instance, IR uses applications such as the freight operations information system (FOIS), the integrated coaching maintenance system, the crew management system and the control office application. These are connected through a mesh network running on redundant leased lines, with VSATs for remote nodes where the terminals are spread across railway yards, etc. Last mile connectivity on this network is provided through DSL.

OM Logistics has invested significantly in developing a COBOL-based ERP system – OM Track & Trace application. It operates on the Micro Focus Server Express platform and supports the company’s core business modules including accounting, reporting, warehousing, human resource, and payroll and consignment tracking. “While upgrading the company’s legacy telecom and IT set-up, we wanted to migrate the Track & Trace application to contemporary technology architecture. Therefore, we shifted from the Server Express platform to Visual COBOL. This enabled the creation and development of enterprise-class applications that run on platforms such as Unix, Linux, Java Virtual Machine and the cloud,” says S.K. Goel, vice-president, information technology, OM Logistics. The company has linked all supply chain elements and provides a single-window logistics service to about 500 clients, the majority of which belong to the automobile industry.

Freightstar Private Limited uses integrated web-based systems built on a newgeneration technology platform. This provides the company proactive system alerts; helps in management information and decision support; generates auto emails based on events; facilitates real-time tracking of shipments, containers, etc.; and provides end-to-end business visibility – from receipt of orders to receipt of payment.

Service providers and vendors

Companies with a widespread logistics set-up have opted for the services of several operators and IT vendors. These include Sify Technologies, Bharti Airtel, Reliance Communications, Tata Teleservices Limited, Vodafone India, Microsoft, Bharat Sanchar Nigam limited, Mahanagar Telephone Nigam Limited, Tata Communications, Tulip Telecom, Tata Teleservices (Maharashtra) Limited, Symantec AntiVirus, SCCM, Checkpoint, HCL Comnet, Oracle, RailTel Corporation, Spectranet, McAfee and IPS.

Issues and concerns

Issues faced by logistics players include infrastructure management, integrating and scaling existing systems and applications with new network components, network downtime, absence of a single platform for data storage, network security and support, integrating last mile technologies with the enterprise IT set-up and user acceptance of new technologies.

For ALL, introducing a Linux-based system was a major concern. “Migration of all users from a Linux-based architecture mailing system with Google applications while ensuring that no emails are lost during the transition phase was a challenge. Further, the activation of our Logisys ERP set-up with a user base of over 100 users and of the warehouse management system sourced from Ramco within a month of implementation was equally challenging,” says Atul Gupta, assistant vice-president, IT development, ALL.

Mobile and enterprise applications

All companies make extensive use of mobility applications. For example, the enterprise mobility applications deployed by Viom Networks include hybrid architecture on Android devices for field force management.

MML uses SMS extensively and the information sent is integrated with its ERP system. This can be accessed on mobile devices in a secure way. Push-based messaging applications are also used. The company is enhancing its mobility-based applications. For instance, its sales executives are able to collect information from the company’s core communication system on their mobile handsets. Also, the GPS is used to track trucks.

The most widely used enterprise applications include audio-, web- and videoconferencing; email; web hosting; instant messaging; toll-free services; and VoIP.

Network redundancy

Ensuring adequate backup is a priority for logistics companies. For example, MML has opted for server provider diversity as its redundancy medium. In fact, at some locations, it has deployed web-based redundancy systems.

Network security

Securing their networks from external threats is a top priority for the surveyed companies. IR, for instance, has secured its data centre through the use of edge security via firewalls and intrusion protection systems, with a demilitarised zone separating the secure zone from the internet. A high-bandwidth gateway is provided to the internet as well as to railways’ private secure networks.

The way forward

Most companies have set an agenda for this year with regard to their telecom set-up. For example, ALL plans to establish cloud-based storage area network infrastructure for backup and retrieval of data for the entire group. “We will also introduce cloud-based corporate videoconferencing and collaboration along with integrated business intelligence tools for collaborative on-demand and automated business reporting,” Gupta says.

Also, as per the IR’s spokesperson, the company is looking to implement mobile ticketing and mobile applications for maintenance and operating staff, establish self-service ticketing kiosks, and increase field data collection through mobile devices and wayside equipment.

MML is planning to move to cloud connectivity, to enhance its internet network and connectivity across various locations. Freightstar Private Limited would deploy mobility applications (for yard-and warehouse-related applications), GPS, GPRS and fuel-monitoring devices and RFID.