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Keeping Track: Logistics companies use telecom and IT to streamline operations

April 09, 2015
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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.

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:

  • 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 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.

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.

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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