India's ambitious solution to effective SCM

I am highly grateful to Indian Institute of Management (IIM) Kashipur , Dehradun Campus for giving me opportunity to carry out this project work under fulfillment of requirement of Forth Semester MBA-WX (2018-20) course work “Supply Chain Management (SCM)”

I hereby express deep sense of gratitude & thank profusely to Professor Kunal Ganguli, IIM Kashipur who allowed me to select this research topic as a project. I am highly thankful to Professor Kampan Mukherjee , IIM Kashipur for his valuable guidelines and support.

Further I would like to submit my undertaking that the work of this project work has been done by me and no other support has been taken from any one from outside apart from available data at open source as well as in text books used as for reference purpose.

(Vishwasrao Bajirao Patil)

INTRODUCTION:

The Supply Chain Management in short termed as SCM in is related to overall management of supply of goods and services from point of origin viz.

farm/industry to the other point of consumption i.e customer/market etc. The product or goods may be consists of Raw-Material or Work-in-Process (WIP) inventory or finished goods. The effective SCM in industry or business involves how well 7Rs (i.e. Right Product+Right Quantity+Right condition+ Right place+Right time+Right customer+Right cost) are managed. (1). Thus the transportation is termed as backbone of the SCM system

Role of Transportation in Supply Chain Management

The transportation involves flow of material, WIP and finished components and finished assemblies as well as products from source destination to another consumption destination.

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The sources such as farms , industry , plant etc are geographically widely spread across India and the product of these source are consumed by the customers and markets which spread away from farm, industry and plant. So the role of transportation becomes vital in SCM for effective business process.

Functions of Transportation in SCM:

  • The transportation serves following function of SCM
  • Quick transportation of perishable products viz.fish, vegetables, fruits, flowers etc.
  • Increase in demand of goods nationally as well as internationally.
  • Creates place utility by bridging gaps between the source destination and consumption destination.
  • Stabilizes price by moving commodities from surplus to deficit areas.
  • Helps industry to use economy of scale in production
  • Increases mobility between capital and labour.

Means of Transportation in SCM

The classification of means of the transportation is made on the basis of followings:

  • Type of Way e.g. Pathway, Waterway and Airways etc.
  • Type of Vehicle viz. Containers, Rails, Ships , Aircrafts etc.
  • Type of Motive Power Used.
  • Type of Terminals Used.

Selection Criteria for Modes of Transport

The following selection criteria is used to decide Modes of Transport to be used:

  • Freight Rates
  • Reliability
  • Transit Time
  • Loss damage claim processing and tracking
  • Shipping market considerations
  • Carrier Considerations

Graphical Representation of the Modes of Transport:

Land Transport

Road Ways and Rail Ways are most commonly used Land Transport in India. The maps of India website of Government of India indicates that India is having very wide range of road network to the tune of 5,903,293 kilometres (3,668,136 mi) as on 31 January 2019. In India 64.5 % of the goods were transported by the Road Network. The primary land transportation is made through use of Commercial motor vehicles viz. Trucks, MAVs, Containers.

Roadways

Motor transport though roadways is widely used in India, the joint study report submitted by TCI and IIM Kolkata (3) shows that 65% of freight transport in India is borne by road only. Road covers around 3.83 Million Km distance in India which makes 2nd largest longest road network in the world (4). Roadways consists of followings :

Status of Roadways in India as on August 2019 (5)

Sl.No Roadways Distance Covered

  • 1 Expressways 2 NHs:National Highways 93051 Kms
  • 3 SHs:State Highways 154522 Kms
  • 4 MDRs:Major District Highways 4010973 Kms
  • 5 RoRs:Rural & Other Roads 2650000 Kms
  • 6 Lanes:Single/Intermediate 7 Lanes:Double 8 Lanes:4 or More

Railways:

Indian Railway, since 2 centuries is historical, most vital and principal mode of transportation in india for freights and passengers. The railways played very vital role in development of agriculture and industrial sector in India since its inception by the British Rule, who gets credit for making start of Railway in india since 1851. Indian Railways network is the largest network in terms of the distance covered in Asia for long distance freight transport. The Railway network is most popular due to dedicated Railway Lines and trains with containers for carrying goods of vital and inflammatory nature such as : Chemicals, Petrol, Diesel, Gases and very heavy vehicles, assemblies over longer distance safely and economically. The Interstate and intercity railways are playing vital role plying the daily consumable household items like vegetables, milks etc.

Airways:

In India Airways transport mode is mostly used for passenger transport with competitive and reduced ticket price wars, airways are giving tough competition to Railway and Roadways. Though it is quickest transportation mode, it is economically costlier than Road and Rail, so it is basically used for transportation of passengers and fright of documents as well as vital components of the machines based on urgency. The Helicopter services are also used for the same by ONGC and other aoil and natural exploration companies.

Waterways:

India is naturally gifted by the longest coastline (comprising of Arabian sea, bay of Bengal and Hind Mahasagar all-together comprising of 7300 Kms of coastline) as well as twelve month flowing rivers (Ganga, Krishna, Bramhputra, Kaveri, Tapi, Godavari , Mahanadi , Narmada, Yamuna etc.). The waterways transport was being used since ancient period internationally as it was the only connecting source available between the different countries to transport heaviest material and household items at lowest cost. In India waterways were used over the stretch of the longest coastline and also through inland waterways. (Creeks, Backwater, canals and rivers). The inland waterways authority of India is developing different ports to handle the waterways freight transportation domestically as well as internationally.

LITERATURE REVIEW

B.S.Sahay & Ramnish Mohan (2006) studied 3PL practices in India and revealed that 61% of freight carried by Road/trucking by year 2001 and the Governments Golden Quadrilateral dream project of connecting four major metros through four lane road along with NS & EW corridor completion by 2007 will boost transportation with safety and optimum time. However the interstate, district road corridor and rural area road quality is very poor which resulted in wear & tear of vehicles, increase in accidents rates and further slowing down supply chain management. The study revealed that Railway transport is lagging on account of efficiency in supply chain due to following factors:

Railway freight charges are variable based on class of commodities, which has discourages small startup industrial sector.

The cost and time for material handling for railways is more in comparison to road transport.

The railway network is limited to some cities and does not reach up to grass root level

In Indian perspective, Air cargo is very much discouraging due to high cost of handling and limited airport facility at each and every cities of India. Moreover India is having very rich longer coastline and internal waterways, but due to paucity of storage space as well as outdated material handling equipment’s at Port Trusts resulted in making India as the lowest million tones carrier percentage in comparison with world standards, Due to lack of infrastructure and facility at Ports the Ships are stranded for loading/unloading for longer time, which increased cost of freight by waterways.(6)

It is quite evident that waterways (sea/coastline) or inland waterways (through river,canal creek, backwater etc) are natural source and less pollutant in comparison to Road/Rail/Air, the cost of fuel required to carry per Million Tonne is comparatively very less. Narayan Rangraj and G Raghuram (2007) research states that India is having very less meagre (0.16%) percentage in Inland Waterways Transport (IWT) of total transportations, in contrast to world-wide statistics viz. Germany IWT-20% and Bagladesh IWT-32%. The study also revealed that IWT in india is hampered due to lack of water level maintenance in the river, decrease in water flow due to damping of agriculture and industrial waste in the rivers. (7) The less integration among the other transport modes is also affecting IWT as the shipment by road provides door to door delivery access. However Vadim Smyk (2010) justified practically that Road Transport is most flexible for shorter distance transportation, however for longer distance and for increased tonnes of material to be transportation, the water transport becomes more efficient with increasing distances. (8)

Thaller et.al.(2013) found that due India’s increasing growth rate in agriculture, industrialization, food and cold storage, the pressure on road and rail network is increased phenomenally. This also resulted in compromising safety by overloading the trucks beyond prescribed limit, exceeding speed and driving time. The data shows that the road accident percentage in increasing day by day which has costs large number of human life. Kichan NAM, Elly WIN ( 2014) studied competitiveness among the Road-Rail-Waterways transport system based on the Transit Time and cost per Tonne of Material incurred. The Transit time is the sailing time for waterways transport and it was calculated by using the following formula

Waterways Distance Between point of origin and destination

Sailing Time (Transit Time)= Speed of the Vessel

The competitiveness study proved that Road Transport is suitable for faster transportation for shorter distance based on transit time. However Road transport is not suitable for carrying high volume due to higher transportation cost and limitation of the truck load carriage capacity. Road transport is more expensive i.e. 3.8times more expensive than IWT . The water transport is ideally suitable for transporting larger volume at lower cost, but the limitations of the IWT is lying in more loading unloading time, insufficient infrastructure and less port development. The study also suggested that the combination of Road-waterways or Road-Rail-waterways , as a multi-model transport will give optimum utilization of transportation cost and transit time , and it will enhance SCM efficiency at optimum level (10).

Government of India’s NDTPC report (11) provided footprint of the existing transport system in India and provided benchmark for development by eying to complete by 2032. The estimated growth of fright traffic till 2031-32 will reach over 13000 BTKM @9.7% growth per annum from 2000 BKTM (of 2011-12) which may put pressure on Road and Rail significantly as these are major dominant transport modes in India. However about 90% (70% in terms of value) moved by ports in case of India’s Foreign Trade, but IWT are underdeveloped despite of their inherent their following advantages :

  • Capacity to transport large volume-cargos from congested Traffic.
  • Connectivity to rural region (less developed).
  • Environmental (less Pollutant) Friendly.
  • Cost/Fuel efficiency.

The annual transportation growth rate by 15 Plan (2031-32) is 9 % however the ports transport will increase by 6% (Reach upto 3068 MT) by 2031-32. The estimated Tonnage Transportation by ports has been estimated as under in the NDTPC report (11)

Sl.No. Port Freight Growth Scenario Port Freight Tonnage Growth Projected by end of 12th Plan

  • 1 Business with same percentage of world tonnage (as usual) 12.4 M
  • 2 Business (Indian Tonnage) Expands by 2.5% to the World Tonnage 26.6 M
  • 3 Business (Indian Tonnage) Expands by 5% to the World Tonnage 53.3 M

The NDTPC pointed out the adverse effect to public health, environment due to increased pressure on road and rail in light of projected growth rate. The committee recommended for development of Multi-Model transport network involving port-waterways development as a major issue and connecting port and waterways terminal by developing road and rail network. The port/IWT development is stressed keeping in following points:

Economics of Scale :

Mega Port facility with larger vessel will provide cost effective advantage per volume of the Tonnage material handled. Also naturally available land port infrastructure will reduce per unit fixed cost.

Economics of Scope:

The material handling equipment’s at Mega Ports can be utilised for different types of Industrial product handling without additional fixed cost.

Agglomeration Economies:

At Mega ports many types of larger companies, logistics agencies , industries will join over their and they get benefit of presence of everyone under one port, the clustering of all the mega companies would be beneficial for transporting of goods and services among themselves as well as customers.

G. Raghuram (2015) of IIM Ahmedabad drawn 5’S framework (SPEED, SUSTAINABILITY, SAFETY, SECURITY and STRESSLESSNESS) of trucking sector in India which reflected the disastrous situation in trucking sector. The 5’S analysis shows that the issues of Road Condition, natural resources, road accidents, cargo theft and driving stress are reducing the roadways transportation SCM efficiency. The traffic congestion (due to improper/illegal roadside parking, underdeveloped loads and increased vehicles) is a major issue in India for Road Transport and in case of Railways cleanliness and security issue is the major problem faced in India as per the study of Rajasekhara Mouly Potluri (2018).

Gaps in Literature :

The Road and Rail are dominant transport modes in India are facing lot of pressure due to increasing freight traffic on account of India’s leading agriculture and Industrial sector’s Growth. The increasing pressure affecting public health, polluting environment, safety, security and Road accidents too. The inadequate infrastructure also reduces supply chain efficiency in terms of the time and cost per tonnage. Since India is such a large country in terms of the distance to be covered it is necessary to develop a multi-model transport system using the low cost high volume transport resources integrating it with road and rail.

India is gifted with longest coastal line and rich source of rivers (Inland Waterways) , these are being natural resources and little investment for upgrading and development of ports and Inland Waterways integrating it with Road, Rail and Air ways will be boost to Supply Chain efficiency and it may meet out India’s Transportation Growth demand.

Research Problem

The study focuses on the efficient transport modes in India which accounts for effective supply chain mechanism. The Road transport is the most dominant transportation mode but it is facing lot of problems and is mainly suitable for shorter distance transportation. The Rail Transport is another dominant transportation mode in india but it is also facing problems of safety, security and connectivity to rural hinterlands. The under developed transportation mode i.e. waterways (Inland Waterways) is the most promising sector as it is naturally available and less harmful for public health and environment.

In India there were different development authorities are available for Road, Rail, Air and Waterways. Each of the authority working autonomously and does not have co-ordination among them. So it is necessary to have a comprehensive authority which may cluster all these resources and develop transportation system which may enhance Supply Chain Efficiency in India.

Reference:

  • Vijaraghavan TAS (2007), Impact of transportation infrastructure on logistics in India, Business Logistics & SCM, wordpress.com/2007/05/23
  • Professor Subrata Mitra (2014-15), Operational efficiency of Road Transport in India, TCI & IIM Kolkata , Joint Study Report (2014-15) , 3rd Edition.
  • Shantanu Nandan Sharma (2018), How a new Govt division plans to reduce India’s logistics cost to less than 10% of GDP , ET Times 7th Jan 2018 ed.
  • Data available at open source of NHAI:National Highway Authority of India
  • B.S.Sahay and Ramnish Mohan (2006) , 3PL Practices: an Indian Perspective, www.emraldinsite.com/ 0960-0035.htm
  • Narayan Rangraj and G Raghuram (2007), Viability Indian Waterways and Transport in India, Indian Research Police Series, Asian Development Bank: INRM Policy Brief No.13/2007.
  • Vadim Smyk (2010), COMPARISON OF DIFFERENT TRANSPORTATION MODES. CASE OOO NVT , Thesis Report, Saimaa University of Applied Sciences Business Administration, Lappeenranta Degree Programe in Russian Trade.
  • C. Thaller, N. Moraitakis, H. Rogers, D. Sigge, U. Clausen, H.-C. Pfohl, E. Hartmann, B. Hellingrath (2013), Analysis of the Logistics Research in India – White Paper Joint Research India and German Federal Ministry of Education and Research (BMBF) under contract IND 11/A15.
  • Kichan NAM, Elly WIN ( 2014) , COMPETITIVENESS BETWEEN ROAD AND INLAND WATER TRANSPORT: THE CASE OF MYANMAR Korea Maritime and Ocean University Engineering Building 1, Yongdo-ku, 606-791, Busan, South Korea
  • Rakesh Mohan et.al.(2014), India Transport Report :Moving India to 2032, GOvt of India , National Transport Development Policy Committee (NTDPC) Report 1st Edition ISBN 978-1-138-79598-3.
  • G. Raghuram (2015), An Overview of the Trucking Sector in India: Significance and Structure , IIM Ahmedabad Research and Publication W.P. No. 2015-12-02.
  • Rajasekhara Mouly Potluri (2018), Challenges of transport sector in India: A dyadic perspective: Article · January 2018 DOI: 10.13106/ jafeb. 2018.vol5.no3.95.

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India's ambitious solution to effective SCM. (2019, Dec 04). Retrieved from http://paperap.com/revised-scm-project-best-essay/

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