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How to start a transport or logistics company. Process, compliance, best practices and relevant law

April 14, 2017
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logistics

In this article, Atipriya Gautam who is currently pursuing M.A. IN BUSINESS LAWS, from NUJS, Kolkata, discusses How to start a transport or logistics company. Process, compliance, best practices and relevant law.

How to start a transport or logistics company. Process, compliance, best practices and relevant law.

What is a logistics firm

A logistics firm is a company that stores and delivers the products of other businesses. Whether shipping, conducting air transportation or trucking a successful logistics company will need to have some means of freight transportation at its disposal; this makes a start-up logistics firm an expensive investment. A logistics firm is an organization that delivers and stores the products of different organizations. They may have expertise in the import and export of products all through the country, or may focus on ground transportation within the states.

Some of the vital points to keep in mind which are beneficial in establishing a flourishing logistics and transport business are as follows:

Experience and Credibility in the Industry

Exploit Your Experience and Connections

Obtain Funding

Get Equipment

Protect your credit record

Find out what documents the bank needs

Show the bank you have the expertise

Security is required

Consider government funding

A partner could be the solution

Consider renting

To determine the target-market the first step is to do proper research that will help in defining the customers. It is this collection and the analysis of information about the customers and probable competitors that will help in planning the marketing strategy. Some of the areas to look into are:

Manufacturers

Agriculture

Wholesalers

Smaller services

Advertise your services

Obtaining contracts

With a specific end goal to be fruitful in getting business contracts you need to show that you have experience in the business and that you can offer your business in view of high standards of business principles and morals. Guarantee that you can offer a superior service that nobody else can. On the off chance if you have a history in the business, it makes it considerably simpler to win contracts.

  1. Speak to proprietors of comparative organizations and make yourself known. The best wellspring of data you can discover around a range of business, is different entrepreneurs.
  2. Make contact with organizations, for example, producers, manufacturers, wholesalers and retailers to check whether you can tender for work to deliver their products.

Transport brokers

Be watchful with whom you work with as most of these brokers do not work morally. When working as a small transport business, one can approach transport brokers and secure contracts through them. Before accepting an agreement through a broker, discuss about the terms of the agreement, so as to have correct and balanced governance set up. A broker can take up to 20% of the agreement value. “Be careful about who you work with in the brokering business as it is not well regulated and it is wise to ensure that they are reliable and upstanding.

How to get onto a suppliers list?

Winning contracts takes diligent work and it takes a lot of networking to create solid connections in the industry. Dependability is another critical viewpoint.

  1. Offer an exceptional service: Keep in mind, there are such a variety of organizations offering a similar service and one needs to provide an incentive to an organization so that they utilize your services. The way around this is to find out about your opposition and offer something they do not, for instance, quicker turn around times, brilliant service or extremely competitive rates.
  2. Piggybacking: Often an established transport organization will be unable to meet their contractual commitments on account of unanticipated conditions. Offer to pick-up any overflow and sub-contract the delivery. It’s often a last minute business however makes a decent chance to substantiate yourself as a reliable supplier.
  3. Sub-contracting: One way for smaller operators to secure contracts is through sub-contracting. Subcontracting happens when a transporter contracts to a third party and not the principal and not to the vital. The subcontractor subcontracts with an established transport organization which has the contract with the principal but maybe does not have the ability carry out the contract.

Starting a logistics and transport business in India

For a start-up a business in India, courier industry is one of the fasted growing markets. Despite the rise of the e-commerce business in India courier industry is growing day by day. The Indian courier industry size in the year 2015-16 was approximately of Rs.14,000 crores. As a premium segment, the courier industry is a small but significant segment of the logistics industry. It is one of the fastest growing segments of the industry and it is expected to grow at 17% per annum to Rs. 20,000 crores in the next three years.

The different kinds of logistics business that one can start are as follows:

The entrepreneurs have two options for starting a Courier Business in India:

  1. Setting one’s own Logistics and courier company, or
  2. Taking a franchise from reputed and well established courier company

Setting one’s own logistic and courier company

Setting up one’s own Courier Company in India requires a lot of money to initially to setup the network. There are many small players in India which are doing good but the reputed foreign companies are well established in the logistic business. For starting a courier company in India one have to raise the funds from the investors. One has the option of setting up a private limited company in India and then raise the funds through investors by allotting the shares of the company.

The top 10 Courier Companies in India which are well-established in the industry are as follows:

  1. Indian Postal Services: established in 1774 and more than 1.5 lakh post offices.
  2. DHL Express India Private Limited: established in 1969 and has a global presence in more than 200 countries.
  3. Blue Dart Express Limited: established in 1994 and is a subsidiary of DHL.
  4. First Flight Courier Limited: established in 1986 & has around 1200 domestic offices.
  5. Fedex India: established in 1973 and has its distribution offices in 220 countries.
  6. DTDC Courier and Cargo Limited: established in 1990 and hold reasonable market share in courier service in India.
  7. TNT Express: established in 1974 and have a presence in more than 190 countries.
  8. Gati Limited: established in 1989 and has a strong market presence in south Asia and Asia pacific region.
  9. Overnight Express Limited: established in 1987 & Serving more than 2800 location in the country.
  10. The Professional Courier Network Limited: established in 1987 and has twenty regional offices and more than 2000 serving locations.

Apart from above mentioned big logistic companies, there are a lot of start-ups, for instance, Delhivery which started from scratch and at present, it is one of the most established e-commerce logistics player in India.

Checklist for starting a courier business in India are as follows:

Taking a franchise from reputed and well established courier company

Due to the absence of assets everybody cannot open their own courier company and even a large number of the successful logistics start-ups learned about the courier or logistics industry by taking the franchise from different companies and after understanding the market, went ahead with their plans.

At present, we have a considerable number of courier or logistics business franchise opportunity in India where one can begin from a small amount of capital.

One simply need to require the following things to apply for a courier business franchise in India:

Some of the established courier Company franchise opportunity in India are:

The development in the Indian economy in recent years has brought about an immense market for logistics services. The logistics industry employs over 50 million people in India. A productive logistics partner can help enhance operational efficiencies for any business by cutting expense and delivery time. This ultimately leads to market share and profits for the business. There are various types of logistics business that one can start.

However, any logistics company needs to look into the accompanying viewpoints to be successful,

Funding and Investment

The initial step that any logistics company would need to take is to look for investment. Amount of investment in logistics business will depend upon the services that one wishes to begin. A simple brokering and freight management service will require less capital compared to a third party logistics service. For instance, to setup a freight forwarding service in India, one will require a capital investment of approximately 12 crores. A pure third party logistics service will require investments ranging from 65-100 crores. Starting an Inland Container Depot (ICD) or Container Freight Station (CFS) requires investment of several hundred crores. It is critical to recognize the specialty services that one wish to target and accordingly formulate an investment plan based on it. Finding investment in logistics is moderately less complex in India in light of liberal foreign direct investment (FDI) norms and active interest shown by huge private equity players.

Compliance and Registration

The next step is to obtain necessary registration and compliance certifications. Just as other businesses, logistics services also require certain registrations and Government compliance. In India, registration with International Air Transport Association (IATA), Air Cargo Agent Association of India (ACAAI) are very useful for freight forwarders. It may also be beneficial to be part of industry forums such as CII Institute of Logistics to raise logistics industry related issues. Other important registrations in India include Directorate General of Foreign Trade (DGFT) registration, registration with the Income Tax Department, Registrar of Companies and related Government Departments.

The following registrations are suggested for a logistics business:

Business Risk

The third aspect that one needs to look at is the business risk. In a developing economy like India, risk management plays a significant role, more so for logistics business. Since the logistics business is extremely dynamic with various partners/vendors involved in the whole operation, danger of a claim is very high. It is vital to cover the obligations by taking adequate amount of business insurance. Numerous insurance companies in India offer such insurance plans. Serious liability issues may arise from cargo damage, theft, injury, environment damage etc. While business insurances help to address a part of the liability concerns, they are not generally very effective. For instance, most Cargo and Property insurance in India will not cover inventory shortages as this is viewed as ordinary risk while running a third party logistics business. Consequently, it is imperative to comprehend the risks before executing any contract.

Clientele

Connecting well with the customers is the key to any successful business. An exhaustive study of different industries/products and understanding logistics needs in such studies is fundamental if an entrepreneur wishes to start a third party logistics company. There are numerous sectors booming as of now, for instance, infrastructure, services, auto and manufacturing as India is basically an export economy. Each of these sectors would require logistics services. Identifying weak areas and proving operationally efficient solutions is key the key to forming customer base in third party logistics services. Once a standard customer base is established, infrastructure investment can be focused upon as well as formation of solutions to cater to the outside market.

Competition

Due to the liberalisation of foreign direct investment (FDI) norms it has become easier for multinationals to enter the Indian logistics sector, it is imperative to understand the competition that the business faces as these capital substantial players can invest intensely in marketing and infrastructure. Henceforth, it is critical to do a thorough search on the competition and to focus on the companies positioning in the market.

 

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