Valued at about Rs 3,064 billion in 2009-10 by credit rating and information agency Crisil, the logistics industry is being heralded as the next big service segment in India with high growth potential. Players in this segment provide a range of services from transportation to warehousing and inventory management. The market is highly fragmented with the unorganised sector accounting for 94 per cent. Transportation is the most critical logistics function, accounting for almost 60 per cent of the total market. It is also the major cost component, accounting for 35 per cent of the total logistics cost, followed by inventories at 25 per cent.

Crisil estimates that the Indian logistics space is poised to grow at a compound annual growth rate of 10.9 per cent over the next five years to reach Rs 4,642 billion by 2014. Given the potential opportunities such growth entails, companies in the logistics segment are pulling out all the stops to leverage telecom as a strategic business tool. These companies lay emphasis on the rapid mobilisation and optimisation of resources, speedy roll out of services and reliability of the existing infrastructure to facilitate production and increase their competitive business value. Such enterprises typically use large amounts of data to support core business processes, which leads to increased dependence on telecom tools. In this context, a robust telecom backbone is crucial.

Initially, these companies used telecom tools for limited business purposes only, which broadly included maintenance management, and tracking of data, personnel and production at their plants at different locations. However, with increased competition, collaboration and information sharing, these enterprises realised the role of telecom and the value addition it brings to their businesses. Today, several technologies and IT tools are being used. For example, a logistics company’s local area network (LAN) typically comprises communication mediums such as leased lines, VSATs, MPLS, ISDN lines, Wi-Fi and radio frequency. Leased lines help the company deal with huge network traffic, apart from providing always-on connectivity between two end-points with much higher bandwidth vis-à-vis plain old telephone services or ISDN connections.

For connectivity to remote locations, VSATs are proving effective to access email, the internet and voicemail as well as for videoconferencing and real-time video inspection.

Besides telecom tools, standard IT tools such as enterprise resource planning (ERP) and customer relationship management (CRM) are being used extensively. Some companies like Blue Dart have also developed their own in-house IT tools. For example, the Space Management Allocation Reservation and Tracking tool permits real-time space and revenue management on the company’s aviation network. It ensures optimal utilisation of

aircraft space for packages and timely delivery of these. Similarly, Blue Dart’s SHIELD is an online security module that helps the company track packages across the country. This tool facilitates the closure of package delivery cases and helps in effective management.

Standard IT tools like ERP systems help the players automate and link all processes and combine data from separate applications, thereby synchronising the flow of data and information across various systems. Another upcoming application is the Citrix Presentation Server software that optimises available bandwidth, enabling faster application performance for improved productivity.

The use of data centres in the logistics vertical is higher than in others. Typically, they perform several functions like ensuring server uptime, data recovery and backup, storage management, hardware and network operations, and providing support for operations and end-users.

Given the highly competitive environment and complex market dynamics, it is not surprising that logistics companies are turning to IT and telecom to enhance productivity and stay ahead of the competition.

tele.net conducted a survey amongst companies in the logistics space to assess their telecom requirements and solutions. The following questions were asked in the survey:

• What are the company’s key technology requirements?

• What mix of service providers and vendors is being used?

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

• What are some of the mobility and enterprise applications that the company has implemented?

• What network security tools has the company implemented?

• What redundancy tools are being utilised by the company?

• Which new product or service is of interest or relevance to the company?

Key technology requirements

The results of the survey clearly show that telecom plays an important role in the logistics space. The survey respondents say that a robust communications network assists in handling vast amounts of data across different branch offices, keeping track of consignments and shipments in real time, and consolidating as well as standardising and streamlining all business processes across locations.

Most of the respondents have opted for a mix of wireless and wireline technologies such as EPABX, LAN, Ethernet, ISDN, leased lines, Wi-Fi, radio frequency and virtual private networks (VPNs) to meet their connectivity requirements. Of these, LAN, EPABX, leased lines, ISDN lines, VSATs and Wi-Fi connectivity are the most widely used. For example, the respondent from Blue Dart said that the company uses over 5,308 computer terminals connected by dedicated leased lines, VSATs and microwave links. The company’s email server is accessed at 304 locations daily by over 4,338 users. Blue Dart also uses handsets, radio sets and pagers to stay connected with its workforce.

The Shipping Corporation of India (SCI) uses a multi-tiered communications set-up. According to Bala Meshram, vice-president, IT, SCI, “The company’s LAN supports network connectivity speeds in the gigabit range. Its wide area network (WAN) set-up is based on an MPLS backbone, which connects all of the company’s offices. It also consists of point-to-point high speed links between the data centre and the head office.”

SCI also uses managed leased line services. It has three such connections, all originating from Nariman Point to MDC and Worli in Mumbai. Two of these links terminate at MDC, one on a primary MPLS router and the second on a secondary MPLS router. The former is a primary leased line connection of 300 Mbps speed and the latter, a backup leased line connection of 51.8 Mbps. The link terminating at Worli is a primary leased line connection of 10 Mbps speed and terminates at a primary MPLS router at SCI’s head office, and there is a separate router at Worli.

Similarly, Ashok Leyland uses DLC (local loop), DLC (NLD) and VSATs for connectivity among its plants, area and regional offices, warehouses, stockyards, etc. The company’s major manufacturing units and main offices are connected to a data centre through leased lines and its regional and area offices, and warehouses are connected through MPLS lines. Its dealers and service centres are connected via multiple communication links such as MPLS, VSATs and broadband. The company uses bandwidth of 2-6 Mbps over its leased lines, while its MPLS line’s bandwidth ranges from 64 kbps to 1 Mbps. The VSATs use both pre-assigned multiple access (PAMA) and frequency division multiple access (FTDMA) technologies provided by HCL Comnet.

While most of the respondents use a leased line-based backbone, Delhi International Airport Limited (DIAL) prefers a passive network based on optic fibre cables and Cat 6 cabling. This has been established along with active network components such as core, distribution and edge switches.

Apart from this, several respondents have established a data centre as well. For example, Shoppers Stop Limited (SSL) has a data centre in place that has multiple functions.

Several IT-based tools and applications are also being used by companies in the logistics space. For example, SSL uses software applications such as enterprise resource management, CRM, business intelligence and inventory management. An ERP package helps the retail major streamline several processes. The package contains modules that simplify the company’s production processes and make the supply chain more transparent.

Ashok Leyland extensively uses applications such as business intelligence and robotic inventory management. For a manufacturing company, a clear and transparent view of the inventory is vital. Therefore, inventory management helps in specifying the size and placement of stocked goods as well as in determining the replenishment lead time, asset management, inventory forecasting, valuation, visibility future price forecasting, etc. Business intelligence, on the other hand, provides the company with a 360 degree view of business operations. It helps in reporting, analysing and mining data, managing business performance, benchmarking standards, etc.

Similarly, Blue Dart uses several stand-alone IT tools. These include the Computerised On-line System for Management, Accounting and Tracking (COSMAT II), an ERP system that interfaces with the company’s human resource management, financial management, purchase, sales monitoring executive information and CRM systems. The COSMAT II was set up using leased lines, VSATs and microwave links on the company’s WAN for effective data transfer across all locations.

Besides, tools such as radio frequency identification (RFID) and global positioning system (GPS) also play a crucial role in this segment. RFID tools help such companies in real-time tracking of consignments and packages by providing visibility of package location and movement.

According to the respondent from Blazeflash, RFID systems complement the GPS tool in tracking information on assets throughout the course of their transit, thereby resulting in streamlined operations, improved security, reduced loss and theft of packages and proactive information exchange across various units.

The internet is being leveraged as a strategic tool by most of the respondents. The Haldia Dock Complex (HDC) uses the internet to reach out to its customers and vendors. Users can access company information, available facilities, service tariffs, tenders and appointments, recent initiatives, etc. on the company’s website. Besides, the website also offers online services related to shipping, financials, marine, ports and railways. For example, under shipping services, it provides a detailed list of the cargo handled at each berth. Similarly, under marine services it provides the estimated time of arrival of each vessel, along with a tentative shifting and departure schedule.

Service providers and vendors

Companies in the logistics space typically use a mix of IT and telecom services. These are provided by operators and vendors such as Bharat Sanchar Nigam Limited, Tata Communications Limited, Bharti Airtel, Tata Teleservices Limited, Mahanagar Telephone Nigam Limited, Reliance Communications, Wipro, IBM, Oracle, Ericsson, Alcatel-Lucent and Sify Limited.

Key issues and concerns

Selecting the appropriate technology and vendor, integrating multiple technologies on one platform, increasing technology and equipment costs, bandwidth availability and keeping pace with the rapidly evolving technology market are major concerns.

For example, Bata India faces the twin issues of severe congestion in its communications network and the inability to optimise the existing bandwidth. For SSL, increasing technology and equipment costs is a major concern. “This issue should be addressed by telecom operators and vendors,” says the company respondent. “Unfortunately, nothing has been done so far on this front.” That apart, the company faces a difficult time keeping pace with the rapid evolution and introduction of various technologies in the market.

A major concern for Kansai Nerolac Paints Limited (KNPL) is the increasing cost of equipment. The company believes that quality services at a reasonable cost are a must for any enterprise today. While the actual cost of communication is low, the cost of setting up a stable and strong voice and video communications infrastructure is substantial. The company also faces challenges in keeping pace with the changing technologies in the market.

Downtime is a major issue for the Cochin Port Trust (CPT). According to the company respondent, even a few hours of downtime can adversely impact the day-to-day functioning since the port handles large amounts of data on a daily basis. Besides, CPT feels that the timely upgradation of technology as per its requirement can be a demanding task.

DIAL faces the challenge of integrating multiple technologies on one platform. According to the respondent, “We have over 50 interfaces where one system passes information to another; the process of designing and testing these systems is challenging to say the least.”

For SCI, the lack of response from the communications network and bandwidth constraints are major concerns.

Mobile and enterprise applications

Companies in the logistics segment use enterprise applications like web hosting, videoconferencing, instant messaging, toll-free services, VOIP and audioconferencing. In terms of mobile applications, mobile data connectivity, corporate intranet and sales force automation are widely used.

Network redundancy

For backup, logistics companies utilise firewalls, security audits, storage area network (SAN) systems, a security operations control centre, leased lines, ISDN lines and data archiving.

Network security

Most of the respondents have a multi-tiered security set-up in place. For instance, DIAL uses a security operations control centre, which is responsible for 24x7 monitoring, reporting and proactive rectification of any suspect or critical/high potential impact.

Similarly, HDC uses a SAN system that helps consolidate huge amounts of data and information in a centralised storage system, provides quick access to the stored information, facilitates backup and disaster recovery process, and allows future expansion of data and information.

The way forward

Most of the respondents have chalked out concrete plans to upgrade or add to their telecom network over the next year. For example, the respondent from DIAL says, “We are looking at implementing technologies that will assist in passenger processing and transfers at the airport. We are also seeking to integrate a few more systems to make airline operations more flexible.”

HDC plans to implement a robust communication system with the latest server and networking technologies. It also envisages implementing CCTV surveillance and access control systems in the near future.

Bata India is looking to deploy more VPN-based communications across all its offices, instead of the existing internet-based communications set-up.

SCI has a multi-pronged plan in mind. According to the respondent, the company plans to set up a secured connection to various applications and portals through the web, integrate the SMS platform with SAP technology, implement a dedicated videoconferencing facility for the management, set up infrastructure that supports webinar sessions, establish WAN for its disaster recovery site, and implement WAN optimisation solutions.