Keeping Track: Logistics companies use telecom and IT to streamline operations
Logistics, April 09, 2015
Over the past few years, the logistics industry in India has witnessed significant changes. It has
come a long way from primarily constituting traditional godowns to including multimodal
transport, container freight stations, inland container depots, cold storage, and supply chain
management. The industry’s key growth drivers are the increasing consumer demand
(particularly in Tier II and Tier III cities), the rising e-commerce business, supportive regulatory
policies, and mega infrastructure projects. According to a study by the Confederation of Indian
Industry, the logistics segment in India is expected to reach $200 billion by 2020, with the costs
pegged at 13-14 per cent of the country’s GDP. In developed countries, logistics costs account
for 8-9 per cent of the GDP.
With the aim of bringing down the high costs associated with the logistics segment, companies
are increasingly adopting various telecom and IT tools. The constant innovations in the telecom
and technology space have led them to make significant investments in telecom and IT to
revamp and modernise key services like warehousing, freight forwarding, express cargo
delivery, and container and shipping services. IT is increasingly being used to gain intelligence
for analysing business information more effectively and taking better decisions. The use of new
technol-ogy is helping companies restructure the entire distribution set-up to achieve higher
service levels and lower inventory and supply chain costs.
The telecom set-up of transportation and logistics companies typically comprises mediums like
multiprotocol label switching (MPLS), very small aperture terminals (VSATs), Wi-Fi and radio
frequency. Most companies use leased lines for achieving point-to-point connectivity, while
VSATs are used for establishing communication access in remote areas.
Apart from putting in place a robust communications set-up, a large number of companies view
enterprise resource planning (ERP) systems as the core of their IT infrastructure. ERP systems
like SAP, Baan and PeopleSoft help organisations capture huge volumes of data for processing
information related to financials, inventory and customer orders. A large number of third-party
logistics providers are using ERP systems to manage their businesses as these make it easier
to track orders and coordinate warehouse and shipping functions, particularly among different
locations. They also help improve internal processes and integrate systems from different
functional areas, making business operations more efficient. Since logistics companies are
responsible for the storage and movement of goods, chief information officers also rely on
various positioning and tracking technology tools for ensuring the real-time tracking of goods.
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Keeping Track: Logistics companies use telecom and IT to streamline operations
Logistics, April 09, 2015
Some popular positioning and tracking technologies are barcodes; radio frequency identification
(RFID); closed circuit televisions; geographic information systems; and global positioning
systems. Today, logistics companies are using RFID to gain greater visibility in their supply
chain. Traditionally, barcodes have been used to identify and track packages but many
companies are now opting for RFID technol-ogy to track goods on the move.
An RFID-enabled system includes tags or transponders that have a small antenna and a chip
capable of holding a significant amount of data like the product number, manufacturer and
location details. It allows companies to identify and locate every single item being shipped.
Using RFID, managers can read, write and rewrite flexible, low-cost tags that are difficult to
duplicate and offer greater data capacity and better durability in bad weather. At present,
logistics companies are using three types of RFID systems. These comprise fixed readers that
have an external antenna and are often located at entry points to facilities and yards; hand-held
readers that provide on-demand scanning; and mobile readers that can be located on moving
equipment like trucks and forklifts for faster and more accurate inventory and process tracking.
As per industry sources, many transportation and logistics companies are now using RFID to
achieve nearly 100 per cent accuracy levels when it comes to shipping, receiving goods, and
orders; 99.5 per cent inventory accuracy; 30 per cent faster order processing; and a 30 per cent
reduction in labour costs.
In addition to positioning and tracking technology like RFID, companies in the logistics domain
are using communications technologies like electronic data interchange (EDI), web portals, and
wireless devices. A number of them have opted for EDI, which is the computer-to-computer
exchange of documents between business partners in a standard electronic format. EDI allows
organisations to move from the paper-based route of exchanging business documents to an
electronic one. It does away with the need for traditional mediums of communication like mail,
courier and fax, and leads to reduced paperwork, faster processing of information, and accurate
billing.
It is expected that as the economy grows, the logistics industry will have to keep providing
innovative and efficient transportation, storage and warehousing services to industries like
automobiles, pharmaceuticals and retail. The adoption of new-age technologies will put logistics
companies in a good position to lower costs and drive operational efficiencies while handling the
growing freight volumes.
tele.net surveyed various logistics companies to assess their telecom-related priorities, the state
of their current communications networks, the challenges faced by them, and their future plans.
The following questions were asked in the survey:
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Keeping Track: Logistics companies use telecom and IT to streamline operations
Logistics, April 09, 2015
- What are the organisation’s key technology requirements?
- What is the mix of service providers and vendors being used?
- What are the biggest concerns with respect to telecom infrastructure?
- What are some of the mobility and enterprise applications being implemented by the
organisation?
- What are the network security tools being used by the organisation?
- What are the redundancy tools being used by the organisation?
- What new products or services are of relevance to the organisation?
Key technology requirements
The survey results highlight that the key technology requirements of logistics companies relate
to their need to process and manage large data volumes, deploy mobility solutions to enhance
service efficiency, and ensure payment gateway security.
To meet communication requirements, companies in this space have established robust
telecom networks using a mix of wireless and wireline technologies. The majority have set up
wide area network (WAN)-based systems, comprising MPLS, leased lines, ISDN, Ethernet and
virtual private networks (VPNs) to support their day-to-day connectivity needs. For instance,
Pinkcity Logistics Limited (PLL) depends on a WAN that helps the company achieve real-time
connectivity across offices. Depending on location, size and volume of work, its regional offices
are connected either through leased lines or broadband. Its network, meanwhile, has a
bandwidth of 10 Mbps, which is sourced from different service providers. Like PLL, Apollo
LogiSolutions Limited (ALL) has also set up a WAN that includes dedicated managed MPLS
lines for meeting its communication requirements. These leased lines are used for providing
connectivity to the company’s branch offices and warehouses, with the set-up being managed
centrally from the head office. ALL has also deployed NEC’s IP EPABX infrastructure, which
supports platforms like the session initiation protocol, primary rate interface, digital and analog
lines, the voicemail service, the “Meet Me” conferencing tool, IP telephony, fax-to-email and
email-to-fax facilities, and IP audio- and videoconferencing.
A few large-scale logistics companies have also deployed IP technology to improve operational
efficiency and reduce network-related expenses. For achieving last mile connectivity, they have
opted for optical fibre cable (OFC) as it offers them huge bandwidth capacity. In addition,
companies use Wi-Fi for last mile connectivity as it helps provide high speed broadband
connectivity at all locations within the organisation. Significant investments are also being made
towards the convergence of voice and data networks. As a result, there has been an increase in
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Keeping Track: Logistics companies use telecom and IT to streamline operations
Logistics, April 09, 2015
the adoption of solutions like e-audio, and web- and videoconferencing; email; web hosting;
instant messaging; toll-free services; and VoIP.
Given the huge volume of data that logistics companies have to deal with, a number of them
have also established data centres for storing data and hosting critical applications. For
example, the Indian Railways’ (IR) Centre for Railway Information Systems has established
such centres and is using them for payroll and financial applications. They are connected to
local area networks in each railway office through the Railnet network, which functions on the
optic fibre cable (OFC) backbone and copper networks set up by IR and RailTel (IR’s telecom
arm). Meanwhile, its passenger reservation system uses a core network of 64 kbps leased lines
for connecting the central servers and providing ticketing services. IR’s current ticketing system
represents a hierarchical two-tier IP network. All ticket counters for reserved and unreserved
ticketing systems are connected through Ethernet and 2 Mbps leased lines to the central
servers, which are further connected through a core network of leased lines.
Service providers and vendors
Companies in this segment use the services of telecom service providers and IT vendors like
Mahanagar Telephone Nigam Limited, Bharat Sanchar Nigam Limited, Tata Communications,
Reliance Communications, Bharti Airtel, Vodafone India and Tikona Digital. In addition, travel
and hospitality companies deploy various IT- and enterprise-led solutions offered by companies
like Microsoft, IBM, Wipro, Tata Consultancy Services, Hewlett-Packard, Dell, Wipro, Avaya and
Juniper Networks.
Key issues and concerns
Time is money for logistics companies, and they need to ensure they stick to their deadlines
while dispatching and delivering cargo. This can only be achieved through a strong telecom
network. However, despite the emergence of new technol-ogies and last mile connectivity
solutions like OFC, most organisations continue to face issues related to network downtime. A
few challenges they face include keeping pace with the fast evolving technology landscape,
ensuring the integration of old and new technology, and handling add-itional costs of employee
training and technology upgradation.
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Keeping Track: Logistics companies use telecom and IT to streamline operations
Logistics, April 09, 2015
Mobile and enterprise applications
With the aim of meeting growing business requirements and integrating various standalone
processes, nearly all logistics companies use advanced information processing systems like
ERP and customer relationship management (CRM). A large number use ERP for managing
their employee count and payroll. ERP and CRM systems also help logistics companies to store
data, and standardise and interpret it in a meaningful manner to arrive at critical policy
decisions. For instance, PLL has developed an in-house enterprise ERP system called Pinkcity
Web, which serves as the backbone of the company’s corporate customer transactions. Each
corporate relationship and transaction is recorded using this system, from the time of enquiry till
the delivery of shipments.
At present, most logistics companies internally make use of various automation tools to
enhance communication with the outside world, with applications like video-, audio- and
web-conferencing; IP video solutions; and VoIP being the popular ones. With the aim of
empowering their ground staff, most companies provide employees with mobility devices for
on-the-go connectivity. To ensure quick access to important information and data for its
workforce, Tiger Logistics uses a host of mobile and enterprise solutions provided by
BlackBerry and Microsoft Office 365.
Airports, freight forwarders, container freight stations, etc. are increasing their focus on
technology adoption, particularly global positioning system technology, tracking and tracing
platforms, and electronic data interchange (EDI). Tracking and tracing systems are a link
between a company’s system and its material flow. In India, the transport and logistics industry
uses such systems to ensure real-time tracking of vehicles. EDI platforms are also used as they
provide point-of-sale data from the entire supply chain at any point of time and eliminate the
need for manual data entries.
Network redundancy and security
The top priority for the logistics industry is to maintain uptime and ensure 24x7 network
connectivity. Industry players deploy several tools to address issues regarding uptime and
response times. For backup and data recovery, many companies deploy leased lines, ISDN
lines, data archiving, firewalls, storage area network systems, along with security audits and
security operation control systems. A number of companies also use switches and routers with
built-in redundancy in their telecom systems.
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Keeping Track: Logistics companies use telecom and IT to streamline operations
Logistics, April 09, 2015
Transport and logistics companies employ tools like firewalls, intrusion detection systems,
antivirus packages and authentication systems for securing their networks. They also make use
of content filtering and isolation circuits to safeguard networks from internal and external
threats. To ensure a high level of security, PLL’s entire network is IP-protected. In addition, the
company has deployed anti-virus packages and firewalls for securing its telecom infrastructure
and avoiding breach of security and data. Similarly, Tiger Logistics uses firewalls, Symantec
Endpoint security and the MacAfee EPS. The company’s network is also secured through
security firewall AnexGATE, which serves to protect each system from potential cyberattacks or
threats in the form of Trojan horse and malware attacks.
The way forward
Recognising the immense benefits of technology adoption, a large number of players are
making significant investments in upgrading their infrastructure and introducing new
applications. With the emergence of cloud computing as the future of the networking world,
logistics companies at large plan to adopt cloud computing for integrating voice, data and video
technol-ogies on the same platform. Companies are also evaluating the introduction of big data
and analytics to leverage the large volume of available data, a detailed analysis of which would
help identify areas for improvement and put in place corrective measures to bring in efficiency
and reduce operational costs.
In sum, the use of telecom and IT in the transport and logistics sector is being driven by the
growing demand for diverse logistics services, and the need to integrate various processes.
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