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Indian Railways to develop Logistics Parks in Railways Land July 13, 2007

Posted by Ramnath Rangaswamy in Indian Economy, Logistics, Supply Chain.
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rly_logistics_hub.jpgThe plan by the Indian Railways to develop Logistics Parks [‘hubs’ in supply chain parlance] is a good one. It has the potential to streamline and optimize the supply chain and reduce the supply chain costs. The service concept, service delivery and infrastructure have to be designed very well for the Railways Logistics Parks to add value to the supply chain.

 

‘Role Models’

There are many Logistics hubs in the region which could act as role models for the Railways Logistics Parks. Two of them which come to mind are Tanjung Pelapas and Jebal Ali.

 

Port of Tanjung Pelapas (PTP) in Johor Bharu, Malaysia has taken a lot of business away from Singapore by offering a world class infrastructure in the logistics hub located in the Port.

 

Jebel Ali has become a big logistics hub between Asia, Africa and Europe thanks to the outstanding service and infrastructure it offers.

 

The Railways Logistics Parks would be smaller in scale but the principles and learnings from these world class logistics hubs can be applied here.

 

Product Flow

There would be multiple product flows into and out of the Railways Logistics Parks.

One case could be different products of a company would come in from different Manufacturing Sites/ Plants by train, get consolidated and be dispatched by train/road to the depots/ warehouses/customers.

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Different products of a company coming in by rail and road

Consolidation at the hub

Despatches to depots/ warehouses.customers

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Bulk products could come in from the Manufacturing Sites/ Plants by train/road, get packed into smaller consumer packs and get shipped by train/road to the depots/ warehouses/customers. So the Logistics Service Providers [3PL/LSPs] would have to setup facilities for repacking.

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Bulk product coming in by rail /road

Packing at the hub

Smaller consumer packs dispatched to depots/ warehouses/customers

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For example Baddi, in Himachal Pradesh (HP) has become a big manufacturing base for FMCGs and pharmaceuticals, because of the tax benefits. These FMCG and pharmaceutical companies could bring their products from Baddi to the Railways Logistics Park in Ambala [ 100 kms] or Delhi [300 kms] , by road and then ship it to the East, West and South warehouses by dedicated, time-tabled parcel trains or container trains. Trains are economical for distances greater than 700kms.

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Products coming from Baddi

Products being sent to DCs in East, West and South

Consolidation

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In the East, Assam has a lot of FMCGs and pharmaceuticals, for reasons similar to Baddi. Guwahati could become a Logistics hub, from where time-tabled parcel trains or container trains move to East, West, North and South. In the East there is also an opportunity to run RORO services to and from Assam, especially during the monsoons when the roads get flooded and the transit times are extremely long.

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Products coming from Guwahati

Products being sent to DCs in East, West and South

Consolidation

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Transportation solutions from the Indian Railways

For the Railways Logistics Park to add value to the supply chain, at least one part of the transportation, either the incoming or outgoing, has to be by rail.

 

The Indian Railways would have to introduce innovative train services, so that customers shift to rail from road and use trains for either the incoming or outgoing from the hub. Currently about 80% of the products in India move by road.

 

One simple innovation could be to introduce time-tabled container trains, time-tabled parcel trains etc. It is essential to have a few time-tabled freight trains, because reliability in a supply chain is a big cost saver [reduces inventory levels, improves customer service]

 

If the transportation, incoming and outgoing, is by road, then the Logistics Park adds no value to the supply chain. It makes more sense, from a supply chain standpoint, to have the hub on the highway, close to the city bypass, outside the city limits, outside the octroi limits and outside any ‘No Entry’ zone. It then makes more sense for the Railways to act as a landlord and build a Mall or Hypermarket. A Mall or Hypermarket would give much better rentals and higher returns on the land that the Railways owns.

Connectivity to Ports and Airports

The Logistics hub should be multi-modal. It should have fast, regular and reliable connectivity with the port and airport. This can be by a dedicated railway line, with regular timetabled services or by good high speed highways.

 

Who should manage the warehouses?

The warehouse and hub should be run by logistics experts. These could be the LSPs [ Logistics Service Providers] or Ports which run such logistics hubs. The Railways should not even try managing the warehouse or the Logistics hub, since it does not have any experience in running world class warehouses.

 

How VAT implementation will help the Railways Logistics Parks

With VAT being implemented, companies would be reworking their supply chain network. The Logistics Parks would be good choices for companies to locate their hubs/ Distribution Centres [DCs]

 

Supporting Infrastructure in the Railways Logistics Parks

 

In addition to the warehouses, repacking facilities, cold storages for the cold supply chain the Railways Logistics Parks should have all the infrastructure required to support the logistics business- office space, communication systems to run the ERP systems, adequate parking for trucks, bonded warehouses, customs clearance, banks etc. The Inland Container Depots should be shifted to the Railway Logistic Parks so that they act as a true logistics hub.

 

It should also have the infrastructure to meet the needs of the people who will work there round-the-clock. It should have resting areas for the truck drivers, canteens, car and motorcycle parking, ambulance, dispensary, taxi ranks, bus-services, security etc.

 

Implementation Plan

To implement the Logistics Parks, the Indian Railways should develop one park first as a pilot. Learn from it and then rollout the others.

 

It should use the companies in the hinterland of the Logistics Parks, CII-IL [ Confederation of Indian Industries- Centre for Logistics], 3PLs and transporters as a sounding board and get inputs and ideas from them.

 

The Logistics Park is a very good opportunity for the Indian Railways to move from a rail transporter to a true logistics service provider. It should use the Railways Logistic Parks to provide a complete service to it’s customers. This will give a great impetus to the supply chain infrastructure of India.

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Comments»

1. alok - January 19, 2008

such a park will require about 500 acres of land with railway connectivity which is not more than 5 kms from any station . do railways have such a land at important place

2. streamlinesupplychain - January 24, 2008

Hello Alok!

I agree that 500 acres would be the land required to setup a combined logistics and business park. Tatas and Jafza, a Dubai based company are planning to build a combined business cum logistics parks of 500acres.

However for a logistics park about 100 acres [ 40 hectares] is sufficient. 100 acres will be sufficient to build a warehouse of about 500000sqft [ for perspective the largest warehouse built by Indo Arya is 514000sqft], park 8000 TEUs 4 high and have a railway siding of about 8 lines.

The Indian Railways would have 60acres-100acres of land near Goods Siding and Yards.

3. Chandra - May 4, 2010

Hi,
Can you give me a perspective in terms of how much land does one require to build an integrated logistics park? When I say integrated, I mean with a CFS, ICT and approx 50K-80K sft warehouse. Also, what kind of net earnings do such facilties operate with say – 60% utilization.

Is 45-50 acres good enough for such facility? What would be the capital outlay for such a development?

Regards

4. sarath Raj - June 4, 2010

Muli tech logistics park article


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