By Rajabahadur V Arcot and Jayanta Bhattacharjee, ARC Advisory Group
Summary
Transportation and Logistics constitute a major percentage of costs in the supply chain, hence are prime targets for companies looking to cut costs in the current economic environment. According to industry estimates, the total logistics spend in India in 2007 was about US$135 billion, including $75 billion on transportation. One of the key concerns of India’s logistics sector is the heavy fragmentation of the transportation sector – almost 65 percent of the country’s trucking outfits operate fleets of five vehicles or less, while a little over 15 percent operate fleets of more than 20 vehicles. This fragmentation leads to non-standardized pricing, putting pressure on individual truck owners in terms of high operating costs and low profits. With the Indian logistics sector having fewer 3PL providers, companies try renegotiate contracted rates with their carriers for reducing transportation expenses.
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