Infosys-Oracle Blog : Transportation and Logistics market in Emerging economies like India

Logistics costs in India are estimated to be around 13% of the GDP, which comes to around US$94 billion in 2005-06.Transport sector’s contribution to India’s GDP is estimated to be around 7.6% in 2006-07, and road transport has a dominant role in this contribution with a share of 4.7% in India’s GDP.Currently, the market is extremely fragmented and dominated by unorganized sector. Most of the organized players are using their home grown operational TMS system for managing their day to day work.

But the key issues with their legacy TMS or logistics applications are:

* Absence of scalability and robustness

* Inability to provide real time supply chain solution to key stakeholders

* Planning and Optimization processes are manually intensive. As a result; customers are not getting the benefit of incremental freight savings across multiple modes and geographies

* The entire freight settlement and audit processes are manually intensive and as a result pretty error prone

But at the same time, every market has its own processes and own macro-economic and micro economic challenges. Like Indian transportation market has the following

* Issues of Non-standardized vehicle types

* Cumbersome taxes like service tax/toll tax/Octroi

* Requirements of multiple operational documents

* Procedure of payments to carriers for executing the shipments and the subsequent implications for tax settlement

* Painful Change management requirements

* Crippling Infrastructure issues in terms of both hard (Road /Rail/Port conditions/network connectivity etc) and soft infrastructures( skilled manpower/business practices/cumbersome Govt policies etc )

So,where there is a huge potential for growth for advanced Transportation Management systems, at the same time the need of the hour is strong localization approach from the advanced TMS systems from established ERP vendors.

TMS best practices prevalent in advanced economies are not applicable and not required too now, in these markets in absolute terms. Products need localization approaches with features relevant for the respective market to address these requirements

LSPs/3PLs/Manufactueers/Retailers know and understand the strategic and operational benefits of these systems but not sure how these systems will fit into the requirements of Indian market conditions. They are clamoring for ‘Glocalization’ approach- Global Products but local execution approach –which will only cater to their requirements. Ultimately the total cost of ownership of these systems are quite high too, they are really looking for reasons to justify this to their Top Management.