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04 05 02 03 Trends and Opportunities in the Logistics Sector in India | Case of Delhi-NCR 01

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04 05 02 03 Trends and Opportunities in the Logistics Sector in India | Case of Delhi-NCR 01 ASCELA ADVISORS PRIVATE LIMITED rd [email protected]; www.ascelaadvisors.com 3 edition April 2020 Outlook 01 An outlook of the logistics sector and performance evaluation of Delhi-NCR Supply-chain network 02 The positioning of logistics hubs and associated key challenges Warehousing scenario 03 Assessment of warehousing trend in NCR region and gap identification Current trends 04 Recent key trends in the logistics sector and its future positioning ASCELA’s viewpoint 05 An outlook of the sector and key growth opportunities Image is illustrative Trends and opportunities in the logistics sector in India | Case of Delhi-NCR ASCELA has been closely studying NCR region and monitoring key recent and ongoing developments. Our first-hand experience of working in Delhi-NCR has helped us develop an understanding of the business potential in the logistics and warehousing sector in the region. Share of logistics cost in India’s GDP Industry Outlook Karnal Logistics/ supply chain plays a critical role in connecting Muzaffarnagar production centers to consumption nodes/ markets. Logistics Jind Panipat sector can be broadly classified into three areas – Uttar transportation, distribution, and storage. Logistics Sonipat Pradesh infrastructure in India at present is not very efficient, leading to Meerut losses and pilferage during transportation and distribution. Rohtak Haryana Hapur Delhi Ghaziabad As per the Food and Agriculture Organization (FAO), Gurugram currently, India loses around 40% of agricultural production Faridabad Bulandshahr Rewari to wastage in the supply chain, while many developing Palwal countries experience losses of up to 25%. National Capital Region (NCR) is the country’s largest urban Alwar agglomeration and serves as the gateway to northern India. Rajasthan NCR is one of the largest manufacturing hubs in the country and accounts for the majority of production activity in north Key Nodes India. Food processing, which includes dairies, rice mills, KMP Expressway sugar mills, confectionaries, and alcoholic and non-alcoholic Yamuna Expressway National Highways beverages, among others, has the largest share in the output in NCR. This is followed by the auto and auto-ancillary, and Map of NCR highlighting key regions metals industries. 1 Supply-chain network This paper focuses on Delhi-NCR as a case and highlights Length of NHs Length of SHs in Road density its key challenges related to its logistics and supply chain in NCR NCR network. Delhi-NCR is a huge production and consumption hub, comprising of various markets, mandis, dairies, and 4.14 KM KM 3,264 KM warehouses. This paper attempts to briefly analyze the 885 /100 SQKM positioning of these hubs and associated key challenges. Dedicated freight Expressway driven Dedicated freight corridor corridor led development development development; NH up-gradation N Meerut Haryana Uttar Sonipat Pradesh Delhi Rohtak NH-44 NH-34 Loni 8% Rajasthan Hapur Bahadurgarh NH-9 NH-9 1% Babarpur Jhajjar Delhi 20% EXIM traffic at ICDs in NCR 1% Patparganj Ghaziabad 30% Dadri 30% ~1.2 Tughlaqabad MTEU EXIM Gurgaon2% NH-34 Trade (as in FY- 8% 1% Bulandshahr NH-48 Faridabad 2019) Noida Rewari ICDs in NCR handled 1.2 MTPA Bhiwadi NH-19 Critical nodes of EXIM traffic in the year 2019, of which ~60% traffic was Market Nodes (cargo share) handled at Mundra port, followed Palwal Dedicated freight corridor by Pipavav and JNPT, handling Major rail connectivity ~20% traffic share each. Hazira Dedicated freight Expressway driven Eastern Peripheral Expressway and Kandla port also handled the corridor led development development Western Peripheral Expressway small amount of Delhi traffic. 1. Transportation network connectivity RRTS has identified 8 routes to accommodate freight traffic With multiple transport infrastructure projects taking shape, (especially perishable commodities during the off-peak hours Delhi-NCR is well positioned in terms of connectivity. of passenger services) and thus leverage the RRTS corridor. The service is likely to enhance supply chain operations in › Inter-state industrial corridors, such as the ambitious the catchment area. Delhi-Mumbai Industrial Corridor (DMIC), and Western and Eastern Dedicated Freight Corridors, are gaining Key concerns renewed focus by accelerating the logistics sector through reduced cost and time factors. 1 Manufacturing activities are concentrated largely in the › As per Airport Authority of India (AAI), Indira Gandhi southern and north-eastern parts of NCR. Northern regions, International Airport handled ~0.7 MTPA of international including Delhi, and areas along NH-44 and NH-9 going freight traffic and ~0.4 MTPA of domestic freight traffic in towards Rohtak have a considerably low share in NCR’s FY2019. Opening up of Jewar International Airport in total production output. Noida is likely to facilitate larger air freight movement. › Eastern Peripheral Expressway and Western Peripheral 2 Internal roads in Ghaziabad region lack proper road width Expressway (or KMP expressway) are already diverting a and efficient infrastructure compared to the national large number of vehicles from Delhi roads by bypassing highways. This restricts opening up of new land parcels for the city. warehousing activities in the region. › Under construction, Regional Rapid Transit System (RRTS) is envisaged to handle cargo volumes in non-peak 3 The rapid urbanization of areas around Gurgaon, Delhi and hours of passenger transportation. This is likely to facilitate Noida have lead to increased land rates, making them the movement of perishable goods between Delhi and unviable for warehouse development. Also, these regions adjacent areas in NCR. suffer traffic congestion due to the dense urban population. 2 2. ICD and CFS infrastructure Inland Container Depots / Container Freight Stations (ICD / ICD Tughlaqabad, 30% ICD ACTL, 5% CFS) act as hubs in the complete logistics chain. Delhi ICD ICD Dadri, 20% ICD CMTL, 4% NCR has 11 operational ICDs/CFSs. ICD Tughlaqabad, the ICD DICT, 15% ICD Pyala, 3% Traffic largest ICD in the country, is, spread over 44 Ha of land ICD Garhi, 10% ICD Palwal, 3% and with 30% market share handled ~0.34 MTEU traffic in ICD Loni, 5% ICD PPG, 1% FY2019. NH-44 cluster NH-44 Cluster N Major ICD: DICT and Loni Haryana Uttar DICT Pradesh Major Distribution centers: Delhi Amazon, Reliance , Food Corporation of India (FCI) NH-34 Rajasthan NH-44 Ghaziabad cluster ICD Loni Major ICD: Patparganj, Dadri, Delhi-NCR Hapur CMTL, and Tughlaqabad NH-9 Major Distribution centers: NH-9 ICD PPG Jhajjar Delhi Gati, Amazon, Amway, Dhara, Ghaziabad Fertilizer Distribution Centers ICD Dadri Cluster CMTL NH-48 cluster ICD Tughlaqabad NH-34 ICD Garhi Major ICD: Patli and Garhi Harsaru ICD Patli Noida Major Distribution centers: Jabong, Flipkart, Big Basket, NH-48 Myntra, Grofers Cluster NH-48 ICD ACTL Rewari ICD Pyala Faridabad cluster ICDs ICD Palwal Major distribution centers Major ICD: Pyala, Palwal Dedicated freight corridor NH-19 Major Distribution centers: Faridabad Major rail connectivity Cluster Food Corporation of India (FCI), Eastern Peripheral Expressway Reliance, Gati, Amway Western Peripheral Expressway 3. Logistics models Organized logistics segment has been witnessing a gradual Outsourcing of logistics activity has become the next logical transition. A plethora of factors are driving this wave of stage of evolution for most sectors. The supply-chain industry is change, such as requirement from quality consistency likely to undergo a major evolutionary leap in the coming assurance, economies of scale being achieved through larger decade, where design, compliance, costs and value-added warehouses, safety and security of goods, efficiency in services may dictate survival and growth. Recent policy operations, quicker turnarounds, need for efficient initiatives are likely to create demand for more and more warehousing designs and the advent of e-commerce. organized players. Prevailing logistics models Shared economy logistics is highly cost-effective as Hyperlocal model enables on-demand delivery, where 1 it saves considerable expenditure on ownership of 3 logistics players team up with local retailers such that their resources and assets. PepsiCo and Nestle share inventories are integrated with online platforms. Amazon warehousing, co-packing and outbound distribution to Prime and Big Basket use a similar model for quick retail stores of their respective fresh and frozen products. deliveries, within hours. Omnichannel logistics integrates physical shopping Cold-chain technology, where temperature-controlled 2 and virtual shopping experiences for providing a well– 4 environments are created end–to–end for perishable informed, hassle-free, on-door shopping experience. goods, right from transportation to storage to delivery. This IKEA has converted its warehouses into showrooms, protects the products from any damage and keeps them and final orders are placed online. fresh and intact untill the last mile. 3 Warehousing scenario Majority of the warehousing activities in India are largely Export volumes Import volume Cold storage undertaken by unorganized segment. However, there has handled by ICDs handled by ICDs capacity in Delhi been a rapid growth in transactions by organized players in the recent past. Also, several large e-commerce companies ~0.8 MTEU and big-box retailers are now looking for opportunities to build ~0.4 MTEU 0.13 MTPA warehouses around major consumption centers. NH-44 cluster N Commodities: Grains, Processed Haryana Uttar Pradesh food,
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