The Multiplier Effect

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Supply Chain Leaders

The Multiplier Effect

Speed and efficiency are the name of the game in the coming years for the supply chain and logistics industry. Multimodal logistics facilitates the movement of goods by using different modes of transport- road, rail, air and water, boosting the efficacy of the traversal of goods. The wheel of fortune seems to be turning for India as the economy is seeing an uptick along with the highest ever FDI being witnessed in the country in recent times. This certainly calls for a supply chain network, backed by multimodal transport to help every facet of this growth keep up with the surge. But are we prepared to ride the multimodal growth story amid inherent challenges? This special story covers it all… pros & cons and how a close co-ordination between government and private players can reap the benefit in the interest of the Indian economy…

In over two decades, India is seen to be getting more foreign investment than China. According to a report published by the Economic Times, in 2018, India has seen over $38 billion of inbound deals as opposed to China’s $32 billion thanks to the fresh opportunities presenting themselves in the sunrise sectors. To sustain this momentum, the country needs an environment that can effectively complement it. Logistics and supply chain are the cogs of the same wheel which if steered in the right direction can tremendously benefit the entire value chain. The transportation industry effectively shapes the economic health of a country and the overall quality of life of its citizens. The performance of the transport systems also has a direct impact on public policy concerns. Additionally, its effects make themselves known on important environmental factors as well.

According to a Deloitte – Assocham Report, transport modes in India, typically operate as isolated entities, with a skewed modal mix that relies heavily (about 60%) on the already congested road transportation. The Indian coastline and river network has historically remained under-used despite its multiple benefits. Cost for coastal shipping is INR 0.15-0.2 per tonne km compared to INR 1.5 for railways and INR 2.5 for road. Addressing these anomalies alone provides a huge potential to lower logistics cost in the economy by INR 21,000-27,000 Cr by 2025.

Anand Sen

Offering insights into the dynamics of multimodal transport, Anand Sen, VP – Temperature Control & Express Logistics, FSC, expresses, “With a steady growth in the trade of manufactured goods, textiles, FMCG products, etc., robust growth in e-commerce and an increased demand for containerization, there are multiple opportunities for the use of multimodal logistics. In Express, for example there is scope for the use of multimodal logistic parks as points of aggregation, transportation and other VAS such as customs clearance and bonded storage yards. There is also the opportunity for the use of airways in temperature-controlled logistics for primary movement of small volume shipments along with roadways for last mile delivery. Multimodal logistics are most ideal in international logistics where a combination of ocean freight, rail roads and roadways are used for import of products.”

Prashant Bhatmule

Aptly defining the essence of multimodal transportation, Prashant Bhatmule, Head – Outsourcing, JK Paper Ltd, explains, “Multimodal transport makes use of trucks, trains, ships, airplanes, etc. Even though the shipment is broken up into different modes of transport, it still falls under a single contract/bill of lading. Companies that choose multimodal shipping can handle all shipping delays and interactions through one provider. Some of the main advantages here are faster deliveries and proficient tracking.”

The quandary of choices

Giving insights on the age-old practices being followed in India, Shantanu Bhadkamkar, President, AMTOI, shares, “India has been among the two largest EXIM trade economies for over the past two millennia until the mid-eighteenth century. It was a natural consequence of high-quality goods & services supported by the highly evolved, reliable & globally competitive logistics, trading, regulatory and banking infrastructure. The riverine transport network and coastal shipping were vibrant as the goods moved across the country. However, since the first passenger train in India ran between Bombay and Thane in 1853, there has been an explosion in the growth & goods movement by rail, which led to decline in coastal and inland waterways transport. With the increase in National Highways and state highway network, industrial clusters & trading market yards were developed in the proximity of road & rail network. As a result, the importance of riverine transport diminished with time.”

Shantanu Bhadkamkar

Considering the timeline since the pre-independence era, rail transport has changed significantly. In the past, goods transport by rail was heavily subsidized in the interest of British trade. It was meant to facilitate the movement of raw material exports and maintain sales in India at competitive rates. This situation has reversed in the post-independence scenario- passenger trains were subsidized, which resulted in a massive surge in the number of passengers and cargo trains got lower priority. This resulted in rail congestion and traders moving cargo via the road carriers.

Sukanta Das

On this note, Sukanta Das, Chief Logistics Officer, Hindalco Industries Limited, comments, “The domestic logistics movement has pre-dominantly seen higher dependence on road transport over Railways. These are mainly the reasons for preferring road:

  • Higher Rail Freight
  • Long & Uncertain Railway transit times
  • Poor Railway terminal handling infrastructure
  • Overall improvement in Road infrastructure
Alok Gautam

Similarly, Alok Gautam, Director – Supply Chain and Logistics, Dow Chemical International Pvt Ltd., highlights, “The dependency on road transport is tremendous in India. For years, road transport has contributed to around 60% of freight movement and it has grown yearly. The incremental addition of network is not able to match the pace at which freight movement is growing. Adding to this is the delay in creating the dedicated rail freight corridor & limited coastal movements all of which is resulting in congestion on the roadways.”

Offering an insightful perspective, KK Kaul, SCM Consultant, Sterling Enterprise, remarks, “The first and foremost reason is awareness about alternate models and route of transportation. Road transportation provides point to point service, reducing the hassles of customer. If you find alternate arrangements of transportation besides air, which is very costly, then it comes down to Rail and Sea. Awareness of Rail transportation is good, but because of damages and storage issues, they are not preferred, apart from the high cost.”

Anand Sen comments, “Surface transport has traditionally been the preferred mode of transport for movement of cargo across India. The high cost of air transport and the lack of options in rail for refrigerated containers has been a constraint on exploring multi-modal options. With the growing demand from time-sensitive industries like pharmaceuticals and dairy, multi-modal options are being explored. Pharmaceutical products such as vaccines, blood, serum, for example are extremely temperature sensitive and they sometimes need to be delivered to remote locations across the country as part of a government health program and that too within a very short time frame. A combination of air and road will hence need to be used for such situations.”

Harnessing the advantage of choice

As has been explained by experts, depending on one mode of transportation will never be helpful to any organization. With regards to this, the logistical planning needs to have a mix of all modes based on the frequency, connectivity, and cost along with the transit time. Holding time at Rail yards and seaport is important, which is required to work out while taking a decision on the transportation mode.

Prashant Bhatmule highlights that multimodal transport can benefit many businesses that ship large amounts of cargo. Using multimodal transport for your shipments can save you money while providing faster transit. Multimodal shipments are broken up into different modes of transport that all fall underneath a single contract/bill of lading. Other than saving money and time, there are many reasons to choose multimodal transport:

Easier Communication: Shipping companies handle updates through a single provider and contract. This makes it easier to facilitate communication.

Provides Faster Transit Options: Due to new restrictions on truck drivers on driving hours and other regulations, some longer shipments are not as fast as they could be. Giving companies more options for their shipment gives the shipper control and flexibility and can help shippers find the best, most efficient way to ship their goods.

“Currently our domestic transport mode mix is distorted with road, rail and water holding 60%, 31% and 9% share respectively. This is nowhere in line with the international benchmark of 25-30% for road, 50-55% for rail and 20-25% for water. The Government, through its National Logistics Policy, plans to promote the development of multimodal infrastructure. Once all these are implemented successfully, it will be easier to leverage all modes effectively,” quips Sukanta Das.

KK Kaul

KK Kaul stresses, “As a company who is in the business of manufacturing & sale and whose lifeline is distribution, all modes of transportation need to be considered. The mode of transportation depends on the distance, route, cost & lead time. Now a days, inventory carrying cost is very high, so nobody would like to keep material in stock for long, hence shortening of lead time is also important. To ensure timely movement of material, we need to look into the ultimate modes of transportation. During high seasons, one can use all the modes depending upon the urgencies and availability. Long distance transportation can be managed by train, and short distances by road.”

Octavio Sanchez

Offering a global perspective, Octavio Sanchez, Managing Partner and Director, TIS Consulting Group, states, “The essential aspects in utilizing multimodal logistics are reliability, a true cost advantage, and low variability. Bottom line, logistics is all about the cost. One common metric of this cost is what is known as the Total Landed Cost, which can include different components but most usually must consider:

  • The actual transportation cost,
  • The financial cost of the inventory in transit,
  • The safety stock cost resulting from the supply chain getting protected against variability.

There’s always a trade-off in using different modes of transportation based on the actual product being distributed. For example, a very cheap product will be more affected by the transportation cost, while an expensive one will be more affected by the inventory in transit cost.

In the end, variability is the most feared concept. If a logistics service takes 10 days but only 5-hour variability, is much better than a service that takes 5 days but with a 3-day variability. The latter will have an impact on safety stock levels and hence in the overall average inventory. While designing a new multi-modal service, everything must be done to ensure variability is kept at the lowest possible. Depending on the maturity of the market, there might be a stronger necessity to evangelize the potential users, run pilot programs, and provide incentives for the first users of new modes or services.

The many wins of the multimodal transport

“Countries that are intelligent about developing multimodal and logistics advantages can take a share on the global logistics markets even with products that they don’t produce or consume. A great example are top countries of the Logistics Performance Index of the World Bank. On the other hand, countries that don’t develop strong multimodal infrastructure are lagged behind competitively,” remarks Sanchez.

China is using different means of transportation for reaching its final destinations. They have developed both sea and rail connectivity to reach to many distant areas. The government is supporting and encouraging companies to use alternate methods to reduce road transportation load. Railways are improving connectivity for internal movement. The best example is rail connectivity of China with Europe. In Europe and America, rail transportation plays a major role beside road. India has large land and waterways available. India has one of the world’s largest network of railways, hence, it will be easy for India to develop a multimodal link. Only focus is required.

Alok Gautam says, “We have seen successful implementation of intermodal operations in Europe, including usage of inland waterways through Rhine network Europe and North America uses rail as mode of transport to a significant extent. While these markets are very different from India, these are good examples of regions that have effectively leveraged multiple modes of freight transportation and created greater efficiencies.”

Giving an apt example, Sukanta Das comments, “The US cement industry is organized in 350+ railway integrated terminals which provide storage and handling infrastructure for bag & bulk and also provide value added services. Similar could be a much-needed development of commodity-specific interventions in India.”

Challenges under the looking glass

The new challenges for the global multimodal landscape are related to the usage of new technologies for traceability, security and safety. The usage of sensors to monitor the transportation of goods, IoT, and technologies like blockchain to provide more reliability to transactions are the new focus areas. According to Sukanta Das, India’s logistics sector is highly de-fragmented and ranks 44th in the latest edition (2018) of the World Bank’s Logistics Performance Index (LPI). LPI is an evidence on how easy or di. cult it is to transport general merchandise within a country.

Alok Gautam adds, “The industry is open to the government’s steps to support the transport sector. Implementation of GST has been very helpful to logistics partners. However, I believe that the policy implementation to encourage technology adoption has to be done alongside the implementation of Bharat Stage (BS) norms. We understand that the government is prioritizing infrastructure development. In parallel, the focus should also be on expediting the rail freight development. Measures that can minimize supply chain costs should be actively sought.” One more area, which has caught the attention of the industry, is standardization. This would include warehousing, packaging, and including standards. A liberal public private partnership ecosystem will boost the development of the logistics sector and the government should focus on this.

According to KK Kaul, the bottleneck that needs government’s attention mainly is the frequencies of trains and offering direct connectivity to major cities. Besides, there has to be additional drop-off & pick-up points, enroute to any final destination. Hands on staff training could improve.”

Transportation cost plays a very big role in profitability of any industry. It has been observed that many-a-times, transportation cost exceeds product cost. Government must look into the rail transportation cost so that industry and people can afford it. Similarly, for sea transportation, connectivity between inland and the seaport needs improvement- it has to be well-connected. To develop this mode of transportation, government can provide incentives on investment by lines and improve connectivity on the domestic internal transportation so that the people utilize sea transport more and more.

Anand Sen highlights that the constraints of the current modes of transport do not allow for the right mode of transport to be used for the category of product. For example, Raw materials need to ideally be transported by Rail, Pipeline or waterways and Consumer goods by road. But due to over utilization of the rail and lack of inland waterway options, almost all products are transported by road. Even in this mode, there are challenges related to the quality of highways and high fragmentation. Last mile connectivity is a major challenge for airways for which again rail or road have to be used.

He adds, “One of the major bottlenecks in railways is the high congestion on tracks since both passenger and freight traffic use the same rail lines, thus saturating the existing infrastructure and increasing risk. The Dedicated Freight Corridor Corporation of India Limited (DFCC) was set up under Indian Railways in 2006 to address the issue but the implementation has been plagued by delays. 432 kms of the western corridor and 343 kms of the eastern corridor are expected to be completed this year and the entire project by 2020. Once completed the corridors will see increased load capacity, track length and speeds.”

Government interventions

With the Government of India taking significant steps to strengthen the logistics sector, we are witnessing significant investments in Railway Lines, Inland waterways or Varanasi Port, an Inland river port on the Ganges river built under the government’s Jal Marg Vikas project, stresses Shantanu Bhadkamkar. The port has provided a direct link with the Port of Kolkata & Haldia Port and Coastal shipping (Sagarmala Programme). It will improve the reliability, safety & security of movement of goods while reducing the logistics cost in particular and transaction cost in general, improving the LPI.

KK Kaul says that the government needs to engage in a lot of activities to see the growth in multimodal transportation. First is rail transportation. Railway is owned by the government, but we have not seen any initiative from the government’s side to encourage the industry for using it. There are private agencies who hire basically the route and then they are going to the private suppliers for collecting material, but there is nothing from the government’s side.”

He adds, “If government owns the train, I think it should develop a logistics department in railways, which will perform logistics business with all the industries. Since they control both, the rail and the track, they can run special trains on defined routs depending upon availability of loads. They can manage trans shipments and leverage the infrastructure available on every part of India. This will not only provide the much-required transportation network, but also will help reduce cost.”

Second is the waterways and sea transportation. Development of Inland waterways is surely government’s responsibility. Hence, a survey is required to identify the waterway routes, mode of connectivity and development of inland ports with the facility of loading and unloading. Government should encourage the investment from business groups to invest in barges and ships for inland waterways and sea routes. They should be given long-term loans on investment and subsidiary, enabling to organize pick to drop facility. An awareness programme from the government is important for the industry to encourage waterways for transportation, which will help people test the alternate methods.

Alok Gautam believes, “The government understands the urgency of developing other modes of transportation. But there are factors that are limiting this development – the delayed implementation of dedicated rail network and the increased passenger traffic resulting in lower priority for freight. However, the recent formation of the department of Logistics under the Ministry of Commerce is a welcome step in this direction and we hope to see positive developments, such as the proposal to set up integrated logistics parks. We believe it will help to de-congest movements and provide better interconnectivity.”

For Sukanta Das, “The Indian Government’s policy initiatives like Make in India and the nation-wide implementation of a uniform indirect tax system hold promise for an efficient, integrated and buoyant economy. Logistics industry would be a critical enabler and facilitator on this journey towards achieving the envisioned growth potential – with better stakeholder coordination, increased infrastructure investment and improved operational efficiency.”

Making Logistics a part of the Harmonized Master List of infrastructure Sub-sector is sure to aid the sector a lot. It would ensure credit ² ow through longer tenures and reasonable interest rates. Further, it would ensure the simplification of approval processes for constructing multi modal logistics parks with capabilities of facilitating both storage and transport infrastructure.

Anand Sen remarks, “Developing an infrastructure for multimodal supply chain calls for coordination from multiple governmental agencies, which on the face of it increases the cycle time of investment. Nevertheless, there has been an increased focus by the government on developing multimodal logistics capabilities since it contributes to the GDP. Case in point are the 34-mega multi-modal logistics parks, which was approved in 2017 with a heavy investment. These parks are to act as hubs for freight aggregation and distribution thus reducing the overall costs.”

Charting the multimodal route

The decision of choosing the best mode of transport for your shipment is derived from many different variables. Leaning towards multimodal transport provides shippers with alternatives that are timelier and save shipping resources. Multimodal freight is preferred also because it is easier to manage on account of its facilitation through a single contract, as opposed to intermodal freight which generally goes through various contracts. Multimodal and Intermodal transport, both can contribute towards environmental sustainability, improved lead times and inventory costs.

The essential aspects that aid in utilizing multimodal is mainly availability, then frequency and price. In India, the frequency of rail transportation to every location and every destination is not available. Same is with sea transportation. The frequency is once in a week as far as cargo movement by train is concerned, explains KK Kaul. Frequency and availability play a major role in deciding alternate route of transportation. Then comes the price. At present, frequency and connectivity of rail transportation is not available for all cities, as far as consumer products are concerned. If the frequency increases, volumes will automatically increase. With this, the railway business goes up which may also result in lowering of rates. There has to be daily movement of cargo trains, and government must look into these services.

Giving an example, Sukanta Das adds, “Inland Waterways can be used for transportation of key commodities by developing commodity specific interventions. For example, for iron ore, most economical mode of transport beyond 300-400 km is inland waterways. Therefore, it is critical to identify the key origin to destination pairs where movement of goods can be facilitated through inland waterways for each commodity. Subsequently focus can be placed on identifying and implementing key infrastructure interventions in coordination with the relevant ministry (for example, handling infrastructure for the specific commodity at the respective port)”.

Offering insights into measures being followed by Dow, Alok Gautam shares, “At Dow India, we have explored the usage of multimodal movement from Kandla and Mundra ports to North ICDs. The next natural step for us would be to push volumes by multimodal movements from Greater Mumbai Region (GMR) to North if frequency and availability of rakes is improved. It would also be interesting to see how we can connect Kandla with Chennai through coastal movements to ensure safer freight movements.”

Agrees Sukanta Das, “Enhanced multi modal infrastructure would support in improving first mile and last mile connectivity to expand market access of farmers, MSMEs and small businesses. Availability of MMLP infrastructure would enable seamless multimodal freight transfer, provide world-class storage and handling as well as delivering value added freight services. Further, it will enhance logistics efficiencies for e-commerce players.”

For Shantanu Bhadkamkar, hinterland terminals, particularly Multimodal Transport Hubs catering to more than two modes of transport will play a significant role in the development of reliable logistics solutions. Switzerland is a landlocked country; however, by investing in high-quality logistics infrastructure such as Trimodal Transport Shipment Terminal at Basel, it has overcome the imitation of being landlocked. The Terminal being at the intersection of Rail, Rhine River and Road network has become Switzerland’s Freight traffic hub. The cargo can be transported from the gateway port to the terminal for either onward carriage by any of the connecting modes or delivered to the consignee with last mile connectivity transport. The Terminal facilitates the consolidation of volumes with operational efficiency of fast transit times and reliable last-mile connectivity. As a result, there will be beneficial implications for total logistics cost, entire transport time and high reliability. Well planned and immaculately executed logistics solutions give opportunities for development of manufacturing and trading clusters not just in the vicinity of the Terminal but also on the arterial transport networks.

Offering the perfect modal mix, Anand Sen states, “Last mile connectivity is one of the most vital links of the supply chain but also the costliest, with some reports suggesting that up-to 40% of the total supply chain cost is taken up for last mile delivery. Matching the right mode of transport based on the industry, location and expected point of delivery is vital to ensure that this vital cog in the supply chain is efficient and cost effective. Surface transport for last mile is the most flexible since it provides the option of delivery to the point of customer’s choice but it also increases the cost since there are chances of missed delivery, repeat delivery etc. Have pick-ups at dark stores, collection points or directly from the warehouse is an option that is also being explored and is ideal where the primary mode of transport is air, sea or rail. Technology and Data Analytics are also very important tools that a lot of companies employ to increase the quality of deliveries, operational efficiency and service levels of last mile deliveries.

With promising growth havens in sight, Shantanu Bhadkamkar concludes, “For offering good logistics solutions to meet the (small, middle-sized & big) customers’ needs with the flexibility they require, it is as important to engage with the small and middle sized logistics service providers as with mega-operators who are willing to invest in large infrastructure projects. It is encouraging that the Draft National Logistics Policy will be soon followed by an action plan to meet the Policy objectives. It is equally heartening that even the State Governments are engaging with logistics service providers for the State Logistics Policy. All these initiatives are long-term measures and will take time to materialize but the beneficial effect will be significant and for a long time, provided the capacities created, are big enough to meet with the requirements of at least next 15 years.”


Smart port communities: To cope with increasing traffic volumes (up to 40,000 truck arrivals daily) and no possibility of expansion, Hamburg Port Authority leverages a logistics platform that consolidates data from various sources (e.g., vehicles) to communicate with the port’s various stakeholders, resulting in shortened driving times (up to 5,000 hours saved per day) and better planning for port stakeholders.

Predictive maintenance: Operating a fleet of nearly 30,000 moving assets that move over 2 million passengers each day, Italy’s railway operator Trenitalia has established a dynamic maintenance model that analyzes sensor data and monitors equipment behavior remotely to decrease maintenance and service costs (8% to 10% reduction expected), while boosting availability and reliability of service for passengers.


Choosing the best transportation mode is a crucial step in shrinking time and cost of moving freight between a shipper and a point of purchase. There are pros & cons to each mode of transportation, depending on the type of freight being moved, and there is an optimal route for every shipment. Shippers are now turning to intermodal transport for their freight because of intermodal’s advantages. Some shippers are even locating or relocating their DC sites near railways for easy and cheap access to intermodal transport. If you are unsure what the best method, or combination of methods, for your shipments, here are some pros & cons of each:


PROS: Broad and flexible road network enables point-to-point service and connects specific activities

  • Relatively small capital cost, especially on short distances
  • Quick implementation of new technologies into industry infrastructure
  • High competition creates low prices and many carrier options
  • High speed of vehicles enables same- or next-day delivery option

CONS: Noise and environmental pollution

  • High probability of accidents and breakdowns
  • Growing driver shortage and stressful working conditions for drivers
  • Limited capacity due to size and weight restrictions imposed by government and technical limits
  • Congestion, often hard to forecast, which results in delivery delays
  • Probability of freight damage due to careless transportation that depends greatly on each carrier/driver liability


Ideal transportation mode for bulky freight and long distances.

PROS: Environmentally friendly (compared to other modes)

  • Long-distance routes are cost effective
  • Strict timing schedule with minor congestion probability
  • Suitable for bulky freight and raw materials, carrying capacity is high and elastic
  • Safest form of transport, highly protected from bad weather impact

CONS: Lack of flexibility due to limited routes that cannot be adjusted quickly and easily

  • Not widespread enough to provide full coverage across country
  • Cannot provide door-to-door delivery, which requires intermediate loading & unloading, amounting to increased time and labour utilization
  • Lack of competition and monopoly ownership due to huge costs of creating construction and maintenance


The fastest yet most expensive type of transportation.

PROS: Quite Fast

  • Small possibility of freight damage due to airport handling and storing regulations
  • Ideal for perishable goods with strict expiration date
  • Often is used for quick 24- hour or 48-hour delivery, and additional costs are passed to consignee

CONS: Capacity is small, resulting in high transportation costs

  • Unsuitable for vast majority of bulky and heavy freight types due to custom, security or capacity restrictions
  • Strictly limited routes and timetable
  • Additional costs caused by loading/unloading, handling, airport taxes and intermediate delivery
  • Environmental pollution and dependence on fuel prices


Effective for large freight amounts of non-perishable goods and for enterprises within cities with water access.

PROS: Less expensive than other modes, especially for large cargo volumes

  • Cost doesn’t fluctuate greatly depending on size and shape of cargo
  • High capacity lets shipper spread costs among other numerous shippers
  • Can service large amounts of bulky freight at once

CONS: Inflexible routes and timetables

  • Very slow and not suitable for perishable goods or fast delivery
  • Limited number of ports
  • Possible delays due to bad weather


Intermodal transport can be effective for just about any large shipment.

PROS: Secure and quick delivery thanks to standard container usage for all transportation modes

  • Combine benefits of different types to create best-suitable solution for specific type of freight and delivery
  • Less labour for handling of loading and unloading
  • Reduce air pollution and transportation costs

CONS: Possible delays due to factors from each mode and loading/unloading setbacks; shipment cannot be time sensitive

  • Not suitable for small shipments
  • Sometimes, dock dues can be applied that increases total cost of transportation
  • Unable to provide consistent service level

Demand for intermodal transportation is on the rise. Wal- Mart, Home Depot, and many other large companies have relocated their massive DC centres to nearer intermodal hubs. As trucking capacity shrinks, shippers are trying to avoid the high prices of motor freight carriers.


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