Pushpank Kaushik, CEO, Jassper
The Indian logistics sector, which accounts for 14.4% of the GDP, is experiencing a transformative change due to its shift to digital in the post-pandemic era. Innovation has been the primary key to managing demand and supply chains. Businesses that dealt with the pandemic's lingering effects in 2022, encountered fresh challenges, and re-evaluated their long-term success strategies. As a result, the way they handle logistics and transportation underwent a significant shift. Today, the warehousing, transportation, and logistics sectors are highly automated and efficient thanks to technology. The growth of the logistics sector is reflected in global indices, such as India scoring 90.3% in the United UNESCAP's Global Survey on Digital and Sustainable Trade Facilitation in 2021, a remarkable increase from the score of 78.5% it had attained in 2019.
India's rich maritime heritage, dating back to 5000 years, underscores the significance of the maritime domain for its security, economic well-being, stability, and sustainable development. The maritime industry will have a significant impact on the effort to reach a USD 10 trillion economy by 2032. The maritime sector is essential for India's energy security, which directly affects the economics of the nation. Over 50% of India's gas and over 80% of India's energy comes from other countries and is transported over the sea.
Last-mile delivery
One of the requirements for driving the logistics sector forward is last-mile delivery. The increasing demand for quick delivery has increased its intricacy and costs, which has pushed businesses to adopt the latest technological solutions. The recent developments demonstrate how last-mile delivery is getting closer to resolving numerous challenges.
The future of Indian logistics is exciting with the introduction of autonomous drones that deliver packages to their destinations and other major changes within the logistics sector. Good last-mile delivery will ensure accuracy, speed, fast turnaround, and efficiency.
Contribution to Indian Economy
The logistics sector has the crucial responsibility of transportation of goods and generating employment opportunities to significantly contribute to the country’s economic growth. Logistics plays a prominent role in every industry - from manufacturing to e-commerce to pharmaceuticals, transportation, and agriculture. It is now a crucial aspect of the economy in the era of hyperlocal delivery and real-time inventory management. The industry is projected to reach $380 billion by 2025 and is expanding rapidly to attain the goal.
The main forces that drive the industry's growth are the rapidly growing hyperlocal logistics and the soaring e-commerce sector. Additionally, the development of the industry is being aided by technological developments and government initiatives like the Make in India campaign that supports domestic production.
Technology to the Rescue
To both offset the challenges and leverage new opportunities in 2023, technology helps the industry to pivot its transportation modes, create strong back-up plans in case of disruption, and automate processes. Technology has significantly improved with the introduction of Artificial Intelligence in supply chain management, including the development of predictive optimization, which is expected to become one of the principal drivers in the logistics industry.
Predictive optimization helps narrow the supply-demand gap through accurate forecasting, facilitating efficient last-mile delivery. Last-mile transportation intelligence, which includes ETA prediction and route optimization ensures smooth and hassle-free operations. Logistics has transformed into the technology business wherein, bookings, payments, operations and customer service, etc. happen over technology devices. Only execution through deliveries happens on the ground.
Real-time tracking & improved analysis
The Indian logistics sector has seen significant changes, including enhanced routing and real-time tracking. GPS technology has made it easier to locate delivery locations. This is improving the consumer experience by ensuring that products are delivered within the given time frame. By determining the optimal route before departure, logistics companies can improve navigation and reduce delays. The process facilitated by the technology provides an efficient and transparent exchange of information between the sender and the recipient.
Challenges & Opportunities
Logistics companies face several challenges, including maintaining a high order-to-inventory ratio for responsiveness, and recruiting a skilled workforce. Meeting customer expectations is another challenge as customers often expect faster delivery than is feasible due to operational issues such as planning and procurement. Additionally, a high attrition rate in the industry, averaging approximately 30% per year, is a significant concern.
Funding is a crucial part of the business cycle, and logistics companies often struggle with working capital requirements due to insufficient allocation of funds and resorting to credit periods. As logistics is an ancillary service, it is also impacted by the consequences that affect the primary industry it serves.
To boost the logistics sector, the government of India has initiated various steps, including the Logistics Master Plan and the National Logistics Policy. These policies aim to establish an integrated, seamless, effective, and cost-efficient logistics network that applies best-in-class tools, procedures, and qualified personnel. Several projects and activities will be further incorporated to expand the mix of intermodal and multimodal transportation.
To manage the complexities of the current logistics environment and leverage new opportunities that have emerged in 2023, logistics service providers are extending their services portfolios towards both upstream and downstream, and are expanding their existing services across more geographies, industries and transport modes. The planned growth and execution strategies in the logistics industry are significantly attributed to the substantial growth of the Indian economy as a whole.
The Indian logistics sector is undergoing a significant transformation due to the adoption of technology and the shift to digital in the post-pandemic era. The industry plays a crucial role in the Indian economy by transporting goods and generating employment opportunities, contributing significantly to economic growth. Last-mile delivery, contribution to the Indian economy, and technology adoption are essential factors driving the success of the logistics and transportation industry. While the sector faces several challenges, such as maintaining high order-to-inventory ratios, recruiting skilled workers, and meeting customer expectations, the government's initiatives like the Logistics Master Plan and the National Logistics Policy will help establish an integrated, seamless, effective, and cost-efficient logistics network. With the planned growth and execution strategies, the logistics industry is set to expand and become a significant contributor to the Indian economy's growth.
