Dr. Saurabh Chandra
Operations Management Area, IIM Indore5
Email: email@example.com; Phone: 0731-2439530
India has a long coastline, which makes it amenable to usage of coastal shipping for bulk movement of cargo as an environmentally friendly mode of transportation. Automotive manufacturing clusters have evolved in Northern, Western and Southern parts of India. The automotive manufacturers primarily use road transportation as a means of outbound logistics of finished vehicles from the factories to the dealers. With rising social and environmental cost of road transportation due to increasing road congestion, the government of India has been trying to promote coastal shipping. Under these circumstances, some companies have started coastal shipping based intermodal transportation of finished automobiles from their factories to the dealers or customers. To this end, we present an integrated mathematical based simulation model to derive a strategic maritime logistics system design for outbound automotive distribution in India.
The current state of logistics in the Indian automotive sector is highly skewed towards roadways. Finished vehicles are transported directly from the factories to the dealers on specially designed car-carrier trailer trucks. For passenger vehicles, the dealers pay the automotive manufacturers in advance to order the vehicles. Commercial vehicles are stored in regional warehouses before final delivery to customers. The bigger commercial vehicles are driven directly for final delivery, although smaller commercial vehicles may be loaded onto specially designed trailers for delivery. The direct road-based deliveries account for more than 95% of the total outbound logistics in the automotive sector. The development of road infrastructure in the country, reduction of barriers due to GST implementation and consequent improvement in delivery time performance along with less damage in transit are main reasons for the success of the roadways mode of transportation. This is true for majority of freight transported in the country domestically. Despite its advantages road-based freight, increasing day by day, is a major challenge to the economic, social and environmental well being of the country. Road transport is expensive for long distance freight. The logistics cost of India with respect to the GDP is already one of the highest in the world. It is necessary to reduce the logistics cost to improve the manufacturing competitiveness of the country. Increasing road traffic increases congestion on the roads, which leads to increased delays and accidents, leading to high social costs. Road transport is also one of the major contributors of greenhouse gases, thus leading to increased environmental pollution.
Given the current logistics scenario it is imperative to develop sustainable logistics solutions in the country. Coastal shipping offers great potential as a sustainable logistics solution for many of the freight traded within India. India has a long coastline served by 12 major and more than 100 minor ports. This coastline covers India from the western extreme of Gujrat to the eastern state of West Bengal. Experts have cited several reasons for the lackluster performance of coastal shipping like lack of supportive regulatory framework and enabling infrastructure, although the Government of India has taken several proactive steps to promote coastal shipping in terms of supportive regulatory framework and financial incentive schemes. Specifically, in case of outbound logistics of automobiles, the current regulatory framework and infrastructural requirements are supportive, if not adequate in the long run. Companies use specially designed ships called roll-on/roll-off (ro-ro) vessels to carry fully manufactured automobiles and other wheeled cargo from one port to another. These ships have fitted rampways, which allow loading and discharging of any kind of self-driven wheeled cargo to and from this ship berthed on a sea-side jetty. Thus, there is no requirement of specialized cargo handling equipment at the ports. The draft (water depth) requirements are also lesser for ro-ro ships in comparison to other types of ships for berthing in Indian ports. Government policy allows operating foreign owned ro-ro ship for Indian domestic trade. Given this opportunity Indian logistics companies have multiple times attempted ro-ro shipping of automobiles from the southern Indian city of Chennai to the western state of Gujrat and vice-versa, although this has failed to become a regular practice. The logistics companies cite high cost of operations coupled with lack of cargo booking as main reason for the failure. We believe that to enable profitable ro-ro service for automobile deliveries in India, an integrative maritime logistics system needs to be developed in collaboration with important stakeholders. The logistics system would include important ports, routes between important ports, appropriate ship sizes, frequency of service across each established route, promise of a minimum cargo booking in each voyage across a route and storage space requirements at important ports. Establishment of a maritime logistics system would allow automotive logistics companies to create an alternative distribution system with important regional ports operating as distribution hubs. Once a major part of automotive shipment is shifted to the coastal shipping mode, a significant reduction in economical, social and environmental costs are expected for the whole country. The same structure can be replicated to other types of freight as well.
To this end we present a mathematical programming model which attempts to evaluate and suggest optimal answers to a maritime logistics system design for finished automotive deliveries in India. Data regarding automotive sales are estimated from published sources, options for ro-ro ship types are taken from shipping companies, road transport and coastal shipping costs and delivery times are estimated from the information gathered from industry experts involved in outbound logistics of automobiles. The mathematical model tries to optimize the cost of overall logistics for a group of automotive manufacturers in India, while suggesting the appropriate ship types for service, ports of operations, important routes and storage space requirements at important ports. Additionally, simulation experiments with this model are expected to yield important insights related to minimum cargo requirements to enable profitable operations. Also, cargo variants based on demand characteristics will be highlighted for modal shift to a slower transportation option.
ORIGINAL ARTICLE: The study is work in progress and the mathematical model is under development. We are also trying to estimate data related to variant level automobile demand across India. All major automotive manufacturers will be considered for simulation. This study is expected to outlay a comprehensive plan for outbound logistics of automobiles using the coastal shipping route for industry executives.