In the highly competitive retail marketplace, typified by changing consumer preferences, different formats as well as large geographical stores spread, the onus on retail logistics to ensure efficiency and cost margins is quite substantial. Hence, it would not be inappropriate to state that oftentimes the viability of a retail operation hinges as much on achieving efficient logistics and supply chain as it does on attaining success in the front end.

The compulsion of retailers, which necessitate seamless logistics function, can be summarised as follows:

• To ensure perfect coordination among various entities involved in the supply chain such as suppliers, manufacturers and vendors.
• To ensure that consumers get the right product at the right time and at the right place.
• To ensure that supply to retail stores across various geographies is seamless and consistent.
• To be flexible in order to allow for changes in the product mix owing to changes in consumer demand.
• To constantly improve operating margins.
• To achieve profitable and sustainable growth of retail operations in the long run.
• To achieve optimal inventory levels and reduce wastage of products.

Components

Traditionally, retail logistics had two major components – transportation and storage. But with the increasing complexity of modern retail supply chains, the scope of logistics has also expanded beyond the traditional definition. An efficient retail logistics function has become a significant instrument for retailers to ensure competitive advantage, and its scope now includes plans and processes that allow the back end to effectively meet consumer demand. Currently, retail logistics is a holistic concept that involves coordinating the following main processes among others:

• Inbound and outbound transportation
• Warehousing
• Packaging and labelling
• Shipment consolidation
• Tracking/Tracing the products
• Inventory management
• Quality checking
• Planning for cost control
• On Point • Retail Distribution Warehousing 5
• Distribution of merchandise
• Reverse handling and flow of products (reverse logistics)

The main processes and activities of retail logistics listed above are aimed at making sure that the shelves in a retail front-end store are never vacant and are filled with the right products at the right time and at the right place. Apart from maintaining an efficient supply chain, which keeps the stores filled with the correct products, it is also important that retail logistics increases operational efficiencies to allow retailers to run a viable retail operation.

Delivery Models

For decades, retail logistics has evolved through various models. Years ago, retailers and manufacturers had to rely on a traditional distribution channel composed of transporters, clearing and forwarding agents and stockists. Since mid-1990s, the emergence of alternative modern distribution channels has allowed retailers to choose from a range of logistics service providers to achieve an efficient storage and flow of products.

As of now, there are four logistics delivery models that retailers can choose from:

• Entirely self-managed logistics and warehousing network
• Partly outsourced to traditional service providers like transporters, clearing and forwarding agents and stockists
• Partly or completely outsourced to third-party logistics service providers (otherwise known as PL players)
• Completely outsourced to fourth-party logistics providers (otherwise known as 4PL players)

Whilst the above four are broad delivery models available to manufacturers, retail chains and retailers, it has been observed through interactions with retailers and warehouse users during this study that oftentimes, hybrid models of distribution are preferred. For example, a retail chain may choose to manage the transportation of its goods while the warehousing may be outsourced to a PL provider. The first two models listed above are more or less selfexplanatory, while the following definitions further explain the 3PL and 4PL delivery models:

3PL – A third-party logistics provider (3PL) is an entity that provides services to companies for some or all of their supply chain management functions. PL providers typically specialise in integrated warehousing and transportation services that can
be scaled and customised to the client’s needs based on market conditions and the demands and delivery service requirements for their products and materials. In India, a large number of professional 3PL  players like DRS, Gati, DHL, OM Logistics, Indo Arya, Sical Logistics, Reliance Logistics, SafeExpress, Agility, M J Logistics, AS Cargo, Kuehne+Nagel, Panalpina, Expeditors and AFL among others have been providing services to retailers and other sectors for their logistics requirements.

4PL – As retailing in India is expanding and reaching new heights in terms of both geographical coverage and volume of products, there is an emerging requirement for an integrating logistics firm to assemble various resources, capabilities and technologies of its own as well as other companies to provide a complete logistics package to clients. Such firms are typically known as 4PL players. Typically, the resources used by a 4PL player are of other service providers, and its fundamental role is to manage all the PL players and other independent agencies employed for a logistics function, providing a turnkey logistics solution to retail chains and to other sectors.

Whilst this model is quite prevalent in developed countries, the 4PL sector in India is at a nascent stage, with a few players emerging such as Future Logistics (which is a 4PL for Future Group). In order to better comprehend and appreciate the respective range of services under each of the outsourced delivery models, the table below is a compilation of the typical spread of services delivered under each respective model. It is pertinent to note that the table below is an indicative compilation based on the feedback received from meetings with logistics service providers and not a comprehensive listing of all possible logistics services.

The organised PL sector in India has been consistently growing over the last few years, mirroring the growth witnessed in the retail logistics sector overall. The sector comprises of global as well as Indian companies that are ramping up their operations on a Pan-India level to cater to retail as well as other sectors. According to a Technopak study, the total outsourced logistics revenue in 00 was INR 1,151 billion, of which 5% or INR 58 billion was attributed to revenue gained from the PL sector. Revenue generated from retail 3PL was estimated at INR billion. The retail PL revenue has been predicted to continue to grow at a CAGR of around 1 % for the next few years.

The entry of large 3PL players has led to significant improvement and organisation within the retail logistics and modern distribution warehousing sector in the country. Over the years, the range of services of PL players has expanded to cover the service lines depicted in the table below. In some cases, it has been observed that PL players have even gone beyond their main service offerings to provide logistics network planning to clients as well.

Source: JLLM

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