1.1 INTRODUCTION 1.1.

1 TRUCKING LOGISTICS
Trucking logistics is the research and planning of trucking operations. Typically, trucking logistics takes into account all the factors involved in the transportation of goods by truck with the goal of maximizing productivity and efficiency. This may include planning the most efficient routes for truck drivers, selecting optimal fuel types according to market trends, choosing the best kind of trucks for the particular task, and hiring an excellent staff of truck drivers. In most industrialized nations, trucks usually are the primary means for commercial transportation and the circulation of goods. Excellent trucking logistics not only helps individual companies achieve success, but may also contribute to the greater benefit of a nations economy. Economic analysts view transportation as a very high expense for any business, meaning that good logistics may dramatically decrease economic expenses. Good planning can eliminate unnecessary expenditures that could limit the success of a business. Trucking logistics may analyze trucking routes, looking for ways to improve efficiency through the reduction of delivery times as well. The precise types of loads being carried are considered in order to determine the best means of transport. Road safety typically is emphasized to ensure the secure transportation of goods and the safety of both truck drivers and regular commuters by planning

delivery routes for specific types of loads. Heavy hauling and long hauling are more demanding aspects of trucking; good trucking logistics typically examines all factors to help facilitate these more difficult types of transport.

1.1.2 LOGISTIC OPERATIONS IN SICAL

SICAL Logistics Ltd., operates mainly in the trucking and port handling divisions. Of these two major operations trucking is taken for this study. There are about 19 trucking branches located across the country. Chennai branch is taken for the study purpose. Chennai trucking branch of SICAL Logistics Ltd., functions with own trucks as well as hired trucks. The major customer for Chennai branch is Tamilnadu Petro Products ltd., (TPL) and Manali Petrochemicals ltd.,The trucking services are provided to these two customers local as well as national. The frequent and major destination in which the trucks operate are-: 1. Chennai- Silvassa 2. Chennai- Dhar 3. Chennai- Nalagarh 4. Chennai- Mandideep Own and hired vehicles are operating in the four routes. The income and expenses are used for analysis to get the best product mix. The best product mix is compared against the existing mix to show the percentage improvement in profit .

1.2 INDUSTRY PROFILE 1.2.1 What is Logistics?

Logistics is defined as a business planning framework for the management of material, service, information and capital flows. It includes the increasingly complex information, communication and control systems required in today's business environment.

1.2.2 Purpose of Logistics Industry

The purpose of logistics industry is to enable an effective transportation or timely movement of goods from one place to another. This could be for the purpose of industrial transportation or even private purposes

1.2.3 Different mediums of Logistics services in India

There are three mediums of logistics services in India. These can be categorized in the following way:

Air freight this is a modern and the safest mode to ensure a fast delivery of goods. A chosen one by many because of the swiftness of the system there are many companies that are now even providing super fats deliveries by airways even on the same day.

Land transport this is a means of logistics support that has withstood the test of time through the extensive network of roads in India. It has

been the popularly used method and used especially in the shipments of heavy articles like machinery and vehicles.

Railways this is also an age old method of shipments and transport. Though most used in case of domestic services this is very effective in the availability of cost effective logistics support in India.

Waterways an essential part of this industry this is also one of the oldest methods. Shipments and transportation of goods is done on an international basis through this way.

1.3 COMPANY PROFILE

Sical Logistics Limited (SLL) is One of the largest Integrated Logistics Solutions Provider. It has its logistic operations in the following areas-: Stevedoring in all major ports in India CHA division provides Customs clearance Shipping division at all major ports. Trucking division covering all states in India. Sical's delivery network includes:

Exclusive walk-in berth at Chennai Port bulk cargo 450,000 Sq.ft of storage space across over 100 warehouses owned and

contracted fleet of 3500 transport vehicles

Fully mechanized coal handling and conveyor facility to handle 12 million tons per Annum at Ennore Port

Figure 1.3.1

Port Handling Sical operates a Walk-in Berth on scheme for 20 years - Chennai Port Handles over 26 Million tonnes annually Chennai - 2.5 Million Tonnes

Tuticorin Vizag Ennore Murmagoa

- 6.5 Million Tonnes - 3.8 Million Tonnes - 8.5 Million Tonnes - 4.5 Million Tonnes

Have the experience of handling at Haldia for TNEB 5.5 Million Tonnes Have the experience of handling at Paradip port - 1.0 Million Tonnes annually (1997 2001)

Trucking Pan-India operations setup Owned maintenance Facility Arrangement in 20 Stations GSM based GPS tracking system for real-time tracking of high value cargo

at Chennai, Tuticorin & Mangalore and

Cargo Handled-Project and containerised cargo bulk, Liquid bulk, finished Bulk

325 numbers of Custom Built Trucks

CHA
CHA operations carried out on Pan India basis with 10 branches spread across India. Customers handled - TANCEM, Wipro,Nava karnataka Steels, BEML ,NMDC-Chennai, MMTC-Hyderabad, Jindal South West -Chennai &Bombay, Henkel etc

Shipping
Handled vessels in all major ports , representing 300-350 vessels per annum.

Customers handled- Setaf Saget SAS, France, Allied Maritime Inc, Greece, Oldendorff Carriers, Germany

Warehousing
Spread over area of about 4.5 lac sqft with 1 lac mt storage capacity

100 plus warehouses across Tamil Nadu, Andhra Pradesh, Karnataka and Kerala

Products handled are fertilizers, cement and steel Value added services of bagging, strapping and shrink packing

Sical Distriparks Limited (SDL)

Handles over 150,000 TEUs per annum in CFSs at Chennai, Tuticorin and Vizag

Market leader in Chennai and Vizag CFS markets for last 5years. Won accolades from Maersk for moving about 1,000 TEUs in 24 hrs Expansion of CFS business to Bangalore and Tuticorin. All CFS have EDI connectivity with Customs Office

Sical Multimodal and Rail Transport (SMART) Limited

Sical Multimodal and Rail Transport Ltd (SMART), an SPV developing Rail linked terminals with network of ICDs/CFS on Hub and Spoke model

Obtained PAN I All India license to operate container trains throughout the Indian Railway system

Commenced rail operations from March08. HCL major customers for domestic movement Currently operating 4 rakes 1 rake Raipur to Ghatsila (HCL) 1 rake - Daurai to Chennai 2 rakes Delhi to Chennai

Accolades Received
- Ranked 4th in Logistics Sector 06 - Logistics provider in Bulk Logistics Express logistics & Supply Chain Conclave -2007 - Best Container service Logistics provider Express logistics & Supply Chain Conclave -2008 - Best CFS in Chennai to SDL from Tamil Nadu Chamber of Commerce 2008

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- Best CFS in Chennai from DP World - 2008 - Award for Traffic Excellence at Tuticorin port for the 6th consecutive year. - Award for Traffic Excellence at Chennai port for the 5th consecutive year

2. REVIEW OF LITERATURE 2.1. SUPPLY CHAIN MANAGEMENT

Supply chain management as mentioned by Deepali Gupta, Kanika Gandhi, Sandhya Makkar and P.C. Jha it is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business models. Managing supply chain is a difficult task because of complex interrelations and integrations as various entities exist in it. One of the entities is transportation of items from source to destination. This process becomes tedious, when items are moving with one or more stoppage as on stoppage point inventory carrying cost would also be incurred.

2.1.2 SC TRANSPORTATION MANAGEMENT

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Decisions taken by Transportation Manager System (TMS) according to D.Aprile, J. Egeblad, A.C. Garavelli, S. Lisi, D. Pisinger it often affects other components in the SC network. Considering that, on average, 3.5% of manufacturers sales costs and 40-60% of total logistics costs are devoted to the movement of products, TM is a crucial issue in todays business environment. Today, companies frequently carry out loading anddistribution operations (planning and operative) based on operators experience, without formal optimization (software) aid. This may lead to space waste inside the container or even worse to infeasible loading. A further complication also occurs when a vehicle must serve more than one customer: it is necessary to optimize the delivery route in order to minimize driving distance and unloading work. Several authors have studied delivery optimization which is known as the Vehicle Routing Problem (VRP).

2.1.3 VEHICLE ROUTING PROBLEM (VRP)

VRP is the determination of the optimal set of routes to be performed by a fleet of vehicle, according to D. Aprile, J. Egeblad, A.C. Garavelli, S. Lisi, and D. Pisinger in order to satisfy the demand of a given set of customers. VRP has been introduced by Dantzig e Ramser in 1959 in its variant CVRP (Capacitated-VRP). Christofides formulated the VRP in 1985. VRP includes a class of problems for the determination of the optimal set of routes to be performed by a fleet of vehicles, in order to satisfy the demand of a given set of customers. In its classical

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formulation, the goal of the VRP is to serve a set of customers, having a known demand, minimizing the transportation cost, starting from a depot, where each vehicle comes back at the end of its route.

3. RESEARCH METHODOLOGY 3.1 PREAMBLE

The fleet of vehicles operated by the Chennai trucking division of SICAL Logistics is giving certain amount of profit but the problem that is persisting in the organization is that the vehicle has not been utilized. The vehicles are allotted based on the availability and not on the basis of efficiency and profitability it generates. Therefore a need had aroused for designing a optimum product mix based in the demand, profitability, efficiency and availability of vehicles.

3.2 OBJECTIVE OF THE STUDY 3.2.1 PRIMARY OBJECTIVE

To increase the profits generated by vehicle operating in Silvassa, Dhar,

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Nalagarh, and Mandideep routes.

3.2.2 SECONDARY OBJECTIVE

To analyze and identify route giving higher profit margin To study the effect of the vehicle deployment on the profit margin in the existing mix in comparison with the optimum mix

To find and choose the efficient route for the vehicles to operate thereby to get a better profit margin.

To formulate a optimum product mix

3.3 NEED FOR STUDY

In order to obtain the best product mix the revenue generated by own and hired vehicles in the four routes has to be analyzed. The analysis of revenue margins is analyzed using statistical tool Two way ANOVA. At the end of this analysis we can find out the need for optimum mix formulation. To find the optimum mix calculations are done with demand and availability of the own

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and hired vehicles for the four routes. At the end of this analysis a optimum product mix solution will be obtained which increases the existing profit margin.

3.4 GATHER INFORMATION

Information gathering is carried out by interaction with the stakeholders of the business process. First interaction would be with the officials involved in the back end process to know how the entire system works/ automation of such process, manual process involved, tracking, role and responsibility. Front end staff would be contacted to know the management of business process involved in managing the vehicle.

3.5 SOURCES OF DATA 3.5.1 SECONDARY DATA

Secondary data required for analysis is the revenue and expenses of the four different routes of own and hires vehicles is gathered from the ERP systems. The demand and availability of the vehicles is obtained from the ERP. Fixed cost and variable cost incurred in usage of own vehicles are retrieved from ERP systems.

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3.6 DATA ANALYSIS TOOLS

Data analysis is done by the use of simple statistical tools like averages and two way ANOVA. Two way ANOVA is used to test the significance between two different variables routes profit margin and vehicle type. Other tests are not applicable for this study.

3.7 SCOPE OF THE STUDY

The findings of the study will be useful to SICAL Logistics Ltd., to deploy the vehicles in a optimal manner. It will also help them in identifying the potential routes and vehicle types that would bring efficiency in operation and increase the revenue and henceforth profit margins. This study also brings out the grey areas of operating the vehicles so that the organization can avoid deployment of vehicles to such areas and focus on the profitable routes.

3.8 LIMITATIONS OF STUDY

The demand for vehicles plying in four different routes may vary depending on the requirement of the customer.

Vehicle availability may also vary especially in case of own vehicles as they would have gone for maintenance, Fitness check, RC renewal.

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The changes in the price of diesel, oil and other market prices affect the profitability.

To combat to the market price changes the hired vehicles vendor revise the rates which may have an impact on the margin.

Study is limited to four frequent route of operations.

4.1 SECONDARY DATA 4.1.1 SECONDARY DATA OF OWN VEHICLES

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Route Chennai- Silvassa Chennai- Dhar

Expenses Invoice Margin %Margin 60513 69392 8879 12.80

61796

75712

13916

18.38

Chennai- Nalagarh

98110

122464

24354

19.89

Chennai- Mandideep

58965

70016

11051

15.78

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Table 4.1.1

4.1.2 SECONDARY DATA OF HIRED VEHICLES

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Route Chennai- Silvassa

Expenses Invoice 69261.89 47910

Margin 21351.8 9

%Margin 30.80

Chennai - Dhar

76617.36

56729

19888.3 6

25.95

Chennai- Nalagarh

99195

122464

23269

19

Chennai- Mandideep

70972.24

56444. 7

14527.3

20.46

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Table 4.1.2

4.2 TWO WAY ANOVA VEHICLES Vs PROFIT MARGIN FOR DIFFERENT ROUTES

4.2.1 HYPOTHESIS
H0 (Null Hypothesis) There is no significant difference between the two vehicles and the profit margin for different routes.

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H1 (Alternate Hypothesis) There is significant difference between the two vehicles and the profit margin for different routes.

Own/Hired

Routes Margin

ChennaiSilvassa

ChennaiDhar

Chennai Nalagarh

Chennai Mandideep

Own Hired

12.80 30.8

18.38 25.95

19.89 19

15.78 20.46

Table 4.2.1.1

4.2.2TWO WAY ANOVA TABLE

Table 4.2.2.1

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 5% Source Treatment Block SS 112.5 19 df 1 3 3 MS 112.5 6.33333 F 17.763 4.9737 pvalue 10.128 0.0244 9.2766 0.1102 Nalagar h 10 2 4 4 20 Mandideep Total Fcritical

Reject

Error 94.5 Destination

31.5 Silvassa Dhar

Total 226 7 No. of Trips (Demand/Month)

No. of Trips (Demand/Year)

120

24

48

48

240

INFERENCE
There is a significant difference between the two vehicles and margin for different routes

4.3 OPTIMUM PRODUCT MIX ANALYSIS 4.3.1 DEMAND FOR ROUTES

Table 4.3.1.1

INFERENCE

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There is a huge demand for silvassa than the other destinations.

4.3.1.1 AVAILABILITY OF OWN VEHICLES

Destination Own vehicle Availability/Month Own vehicle Availability/Year

Silvassa Dhar 6 72 2 24

Nalagar h 4 48

Mandideep Total 4 48 16 192

Table 4.3.1.1.1

INFERENCE
As there is a huge demand for silvassa the availability of the own vehicles for it is also more.

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4.3.1.2 AVAILABILITY OF HIRED VEHICLES

Destination Hired vehicle Availability/Month Hired vehicle Availability/Year

Silvassa Dhar 6 72 2 24

Nalagar h 4 48

Mandideep Total 4 48 16 192

Table 4.3.1.2.1

INFERENCE
As there is a huge demand for silvassa the availability of the hired vehicles for it is kept high.

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4.3.2 FIXED COST CALCULATIONS

Particulars Insurance National+ Mother Permit Tax Calibration +CCOE RC Renewal Other Fixed Expenses Total FC per year FC Per Month FC per trip Amount (in Rs.) 18000 17500 18000 5500 1500 20000 80500 6708.333333 3354.166667

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Table 4.3.2.1

INFERENCE
Fixed cost is the most important factor that affects the profit margin of the vehicles plying in different routes; hence fixed cost is calculated and deducted from the hired vehicles profit margin to combat opportunity loss.

4.3.3 MARGINS PER TRIP

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Destination Own Margin per Trip (in Rs.) Hire Margin per Trip (in Rs.)

Silvassa 8879 17998

Dhar 13916 16534

Nalagarh 24354 19915

Mandideep 11051 11173

Table 4.3.3.1

INFERENCE
Own vehicle margin and hired vehicle margin after deducting the fixed cost. Per trip hired vehicle margin is high for all the destinations except Nalagarh where own vehicle gives more margin.

4.3.4 OPTIMUM MIX PER MONTH

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4.3.4.1 OPTIMUM MIX PER MONTH CALCULATION

Desination Silvassa Dhar Nalagarh Mandideep Max Margin 17998 16534 24354 11173 Ow n 6 2 2 3 Demand 10 2 4 4 Hired 6 2 2 3 Min. margin 8879 13916 19915 11051 Total 72472 33068 48708 22468 Variation 9119 2618 4439 122

Table 4.3.4.1.1

INFERENCE
From the above calculation we can infer that Silvassa is the destination which is having a great potential to give good profit margin when deployed with hired vehicle.Hence entire demand for Silvassa is to be satisfied by deploying hired vehicles.

4.3.4.2 OPTIMUM PRODUCT MIX PER MONTH

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Routes Chennai - Silvassa Chennai - Dhar Chennai - Nalagarh Chennai - Mandideep

own hire 0 0 2 3 10 2 0 1

Table 4.3.4.2.1

INFERENCE
Hired vehicles are preferred for Silvassa and Dhar destinations whereas own vehicles for Nalagarh and Mandideep.

4.3.4.3 OPTIMUM PRODUCT MIX MARGIN PER MONTH

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Destination Silvassa Dhar Nalagarh Mandideep

own 0 0 4 3

Own Margin 8879 13916 24354 11051

Hire 10 2 0 1

Hired Margin 17998 16534 19915 11173

Total(in Rs.) 179980 33068 97416 44326 354790

Total Profit for all Routes

Table 4.3.4.3.1

INFERENCE
A projection of the revenue that would be generated by the optimum mix is Rs 354790 per month by all the routes.

4.3.5 EXISTING PRODUCT MIX MARGIN

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4.3.5.1 EXISTING PRODUCT MIX MARGIN PER MONTH

Destination Silvassa Dhar Nalagarh Mandideep

Own 3 1 2 3

Own Margin 8879 13916 24354 11051

Hired 7 1 0 1

Hired Margin 17998 16534 19915 11173

Total (in Rs.) 152623 30450 88538 44326 312937

Total Profit For all Routes

Table 4.3.5.1.1

INFERENCE
Revenue that is generated by the existing mix is Rs.312937 per month by all the routes. From the above table it is found that vehicle deployment is not optimal.

4.3.5.2 EXISTING VS OPTIMUM PRODUCT MIX PER

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MONTH
Optimum Mix Profit 354790 Differenc e 38853

Existing Mix Profit 315937

% Margin Improvement 11

Table 4.3.5.2.1

INFERENCE
Comparison between the existing mix profit margin and optimum mix profit margin shows that there will be a 11% improvement in profit if optimum product mix is deployed.

4.3.5.3 EXISTING VS OPTIMUM PRODUCT MIX PER

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MONTH

Figure 4.3.5.3.1

INFERENCE
Diagram depicting destination wise own vehicles and hired vehicles margin per month.Existing mix and optimum product mix produces same margin in case of Nalagarh and Mandideep.Hence these two routes have been already optimally deployed.

4.3.6 OPTIMUM PRODUCT MIX FOR A YEAR

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4.3.6.1 VEHICLES MARGIN PER YEAR

Destination Total Margin Capacity of Own (in Rs.) Total Margin Capacity of Hire (in Rs.)

Silvassa 639288 1295856

Dhar 333984 396816

Nalagarh 1168992 955920

Mandideep 530448 536304

Total (in Rs.) 2672712 3184896

Table 4.3.6.1.1

INFERENCE
The own and hired vehicles margin for a year is calculated show that the total margin capacity given by hired vehicles is more than the own vehicles per year. The hired vehicles margin for Silvassa,Dhar and Mandideep is greater than own vehicles margin. Hence it is advisable to deploy hired vehicles for these destinations to improve the profits for a year.

4.3.6.2 OPTIMUM PRODUCT MIX FOR A YEAR

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CALCULATION

Destination Silvassa Dhar Nalagarh Mandideep

Max Own Margin 1295856 72 396816 1168992 536304 24 24 24

Demand 120 24 48 48

Hire 48 24 24 24

Min. margin 639288 333984 955920 530448

Total 47272896 9523584 5113728 140544

Variation 656568 62832 213072 5856

Table 4.3.6.2.1

INFERENCE
From the above calculation we can infer that Silvassa is the destination which is having a great potential to give good profit margin when deployed with hired vehicle.Hence entire demand for Silvassa for a year is to be satisfied by deploying hired vehicles. Mandideep and Nalagarh destinations can be deployed with own vehicles itself as they give better margins.

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4.3.6.3 OPTIMUM PRODUCT MIX FOR A YEAR

Routes Chennai - Silvassa Chennai - Dhar Chennai - Nalagarh Chennai - Mandideep

Own 0 0 48 36 Table 4.3.6.3.1

hire 120 24 0 12

INFERENCE
Hired vehicles are preferred to be deployed for Silvassa and Dhar destinations whereas own vehicles for Nalagarh and Mandideep.

4.3.6.4 OPTIMUM PRODUCT MIX MARGIN FOR A YEAR

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Destination Silvassa Dhar Nalagarh Mandideep

own 0 0 48 36

Own Vehicles Margin 639288 333984 955920 1168992

Hire 120 24 0 12

Hired Vehicles Margin 1295856 396816 1168992 536304

Total (in Rs.) 155502720 9523584 45884160 48519360 259429824

Total Profit for all Routes Table 4.3.6.4.1

INFERENCE
A projection of the revenue that would be generated by the optimum mix is Rs 259429824 per month by all the routes.

4.3.7 EXISTING PRODUCT MIX FOR A YEAR

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Destination Silvassa Dhar Nalagarh Mandideep

Own 72 0 24 36

Own Vehicles Margin 639288 333984 955920 530448

Hire 48 24 24 12

Hired Vehicles Margin 1295856 396816 1168992 536304 Total Profit For all Routes

Total 108229824 9523584 50997888 25531776 194283072

Table 4.3.7.1

INFERENCE
Revenue that is generated by the existing mix is Rs. 194283072 per month by all the routes. From the above table it is found that vehicle deployment is not optimal.

4.3.8 EXISITING Vs OPTIMUM PRODUCT MIX PER YEAR

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Optimum Mix Profit 259429824

Actual Mix Profit 194283072

Difference 65146752

% Margin Improvement 25

Table 4.3.8.1

INFERENCE
Comparison between the existing mix profit margin and optimum mix profit margin shows that there will be a 25% improvement in profit if optimum product mix is deployed.

4.3.9 EXISITING Vs OPTIMUM PRODUCT MIX PER YEAR

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Table 4.3.9.1

INFERENCE
Diagram depicting destination wise own vehicles and hired vehicles margin per year.Existing mix and optimum product mix produces same margin in case of Nalagarh and Dhar .Hence these two routes have been already optimally deployed.

5.1 FINDINGS

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This study reveals that there is a difference between the profit margins given by the own and hired vehicles for different destinations Silvassa,Dhar, Nalagarh and Mandideep.

Most the own vehicles are giving lesser profit margin than the hired vehicles for all the routes.

The reason behind the lesser margin is the fixed costs such as the maintenance, tax, permit, insurance and variable costs such as the driver and cleaner wages, inventory expenses, toll expenses, RTO mamool, enroute repairs expenses, diesel and oil expenses.

The route Chennai Silvassa is giving 13% more margin when operated with hired vehicle than on own vehicle. Whereas Chennai Nalagarh route own vehicles are found to be more profitable.

In case of Chennai- Mandideep route the margin remains almost the same for own and hired vehicles.

Chennai Dhar route produces is best margin when hired vehicles are deployed.

Analysis shows that there is more demand for the vehicle to operate in the Chennai Silvassa route.

As hired vehicles give a good profit percentage, this route is deployed only with hired vehicles for the optimum mix.

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Same is the case with Chennai- Dhar hired vehicles are assigned for the optimum product mix

Own vehicles give good profit margin in Chennai- Nalagarh route. Hence the same is deployed for optimum mix.

In Chennai- Mandideeop route have a mix of 3:1 ratio of own and hired vehicles deployed.

By such Optimum product mix deployment there is a overall profit improvement to 11%for the four destinations from the existing margin.

The same deployment done for a year gives a 25% improvement in the profit margin.

5.2 SUGGESTIONS

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This study has to be conducted periodically as the profit margin greatly depends on prevailing market prices.

Any change in the cost of diesel and oil the hired vehicles vendor will revise the lending rates which may affect the profit margins.

The same study if done on a regular basis helps in identifying the gaps between the actuals and budgets profits and also the least and best profotable routes.

The study has been conducted for the four major frequently operated routes.The same can be done for the entire fleet of vehicles to enhance the profit of the trucking division as a whole.

This study can be further improvised by suggesting the organization to adopt operational strategy Hub and spoke study and Milk run logistics.

The above two strategies when implemented will not only give a better profit but also enables to achieve economies of scale.

5.3 CONCLUSION

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The study titled A study on exploiting route-product mix to enhance profitability has helped in concluding that SICAL Logistics Ltd., is indeed gaining profit out of its operations of own and hired vehicles. But the profits obtained are not by the optimum deployment of vehicles. This study has helped greatly in finding the most profitable product mix and thus enabling to improve the profit margin every month and there by annually.

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