Paradigm Shift in India’s Logistics Sector

STZ VP 8 Hutchinson

Sumit Sharma Co-Founder & CBRO, GoBOLT
Sumit Sharma Co-Founder & CBRO, GoBOLT, shares his observations on the status of the Indian logistics industry, the opportunities and pitfalls, and steps needed for its emergence as a key sector in India’s economic growth.

Overview

The annual logistics spending in India accounts for 14% of India’s GDP, which amounts to $270-310 billion as India’s GDP is roughly $3 trillion. This is much higher than the 8-9% limit in USA, Europe etc. Almost 99% of this cost is accounted for by the unorganized sector, comprising small truck owners, small warehouse operators, freight forwarders, last-mile connectivity providers etc. This increased spending has led to rise in costs of Indian goods, making them less competitive. Also, the presence of unorganized players has led to the segment contributing lesser in terms of tax as well as circumventing the Motor Vehicle law or on-road duties. Most importantly, the sector has largely remained out of technological influence, at a time when almost every other industry is seeing digital intervention and transformation. However, led by new-age, tech-focused players, the logistics sector is warming up to the idea of digitization for progress.

Tech-enabled logistics to be game changer

In 2016, India jumped 19 places in the Global Logistics Performance Index, riding on the efficient operational frameworks introduced by a large number of tech-enabled start-ups, to ensure seamless movement of goods across the country. But what incentivized such players to enter a domain that was already a high-cost, low-margin business populated by fringe players? The rise in demand due to e-commerce has played a significant role. The staggering growth in e-retail and online purchase of goods has given the logistics sector a new lease of life. Heavy investment is being directed towards the sector, and according to a report, till 2017, in terms of the amount being invested, transport and logistics took the third and fourth spots, respectively, with $528 mn and $271 mn received in funding.

One of the biggest myths concerning Indian logistics was that direct costs such as transportation, warehousing and value-added services such as packaging, are the key reasons for India’s high-priced logistics services. The reality, however, points otherwise. 40% of India’s total logistics costs of $270-310 billion, are due to indirect costs and inefficiencies in the supply chain such as sub-optimal route planning, resource allocation and utilization, thefts, damages and losses in transit etc. In developed markets, these are typically less than 10% of the total.

Tech-enabled logistics players are utilizing the entire arsenal of modern-day technologies such as Artificial Intelligence, Machine Learning, Internet-of-things (IoT), Data Analytics, Network Programming to optimize efficiency and provide users with a seamless delivery experience. These players are being egged on to introduce newer software, delivery mechanisms and operational frameworks by e-retailers themselves, as in an increasingly homogenized market, better delivery experiences and adherence to deadlines are serving as significant determinants of success.

STZ VP 8 Hutchinson

Lifting regulatory barriers

In November last year, the logistics sector was granted ‘infrastructure’ status - a decision that followed policy-level changes such as implementation of GST and demonetization. The status will help LSPs to avail infrastructure lending at easier terms with enhanced limits, access to larger amounts of funds as External Commercial Borrowings (ECB), access to longer tenor funds from insurance companies and pension funds, and be eligible to borrow from India Infrastructure Financing Company Limited (IIFCL). On the other hand, GST and demonetization has enabled structured players to come to the front in a sector which has been historically unstructured and fragmented. The implementation of ‘One country, One tax’ in the form of GST has also facilitated creation of optimized geographical routes for product delivery, as service providers do not have to establish a warehouse in every state to avoid paying state taxes.

In a further fillip to the industry, Commerce and Industry minister Suresh Prabhu recently announced the establishment of a new national-level logistics plan, aimed at devising the most cost-effective method to carry out logistical services in the country till 2035. The plan will identify bottlenecks and gaps prevailing in the sector, and promote technological intervention at every stage-from product surveillance to safety of the product, driver and vehicle, off-location vehicle control, geo-fencing, equipping vehicles with communication devices while developing work models that distribute driver workload so that get a better work-life balance. In essence, the plan aims to modify every aspect of the logistics industry to put it at par with the developed world economies and make Indian goods that much more competitive in international markets.
Tech-enabled players in the logistics sector are being egged on to introduce newer software, delivery mechanisms and operational frameworks, as in an increasingly homogenized market, better delivery experiences and adherence to deadlines are serving as significant determinants of success

Emerging markets

With the growth in e-commerce, consumers as well as entrepreneurs are emerging from tier-II and III cities of India, and providing a tremendous impetus to logistical growth. These consumers have also started looking at services not only from a low-cost perspective, but are now giving importance to professionalism, user experience, tech-feasibility, operational capabilities, etc. They are opting only for tech-enabled, established LSPs rather than small-time players, leading to greater consolidation in the industry. E-commerce has changed the way logistics is valued in the entire supply chain. Logistics has grown beyond the status of an enabler to an important part of the economic revolution.

Indian logistics sector has the potential to become a $215 billion market in the next two years compared to about $160 billion currently. As per the Economic Survey 2017-18, Indian logistics sector provides employment to over 22 million people. With continued growth and inclusion of tech-focused players, a further 10% decrease in indirect costs and a cumulative growth of 5-8 percent in exports, it is expected to provide employment to about 50 million people. For the logistics sector, the current positive trends herald growth and progress in the coming years.

Lifting & Specialized Transport — October-December 2018

Click Here
To Know More / Contact The Manufacturer
Please provide your details we will contact you as soon as possible
Please let us know your name.
Invalid Input
Please let us know your Designation.
Invalid Input
Please let us know your City.
Please let us know your State.
Please let us know your Country.
Please let us know your Contact Number.
Please let us know your email address.
Please brief your query.

Tiger Logistics - Handling Project Cargo with Skill & Efficiency

Tiger Logistics (India), a multimodal transport operator (MTO), is involved in transportation and custom clearance of project cargo across the country. Time and again, it has demonstrated its skills and achieved new heights Read More ...

Everest Engineering: Moving to Heavy Machines

Keen to help construct India’s high-speed railway projects, metro rails, flyovers, bridges, etc, Everest Engineering Equipment has decided to foray into the Heavy Machinery segment, informs PV Ramdev, Managing Director. What new product Read More ...

Wind Energy On The Go

As the wind generator components are becoming bigger, the challenges for the transport contractor are also becoming bigger. Where the blades used to measure 18 – 24 mtr and could be transported on extendible trailers, they can now Read More ...

Faymonville offering multi-faceted technical solutions to meet every transport challenge in North America

The Faymonville Group offers special trailers that combine cutting-edge technology with extremely practical development, especially tailored to the US market needs, at booth F.2872. HighwayMAX: The steerable 9-axle (3+3+3) HighwayMAX Read More ...

SCHEUERLE focuses on modular transporter SCHEUERLE SPMT PowerHoss

SCHEUERLE is presenting the SCHEUERLE SPMT PowerHoss with four axle lines and a diesel drive at booth F3264. These compact, self-propelled transport modules are also specialists for heavy in-house transport. So far, this operated Read More ...

Goldhofer: Moving Big Things

Visitors to Conexpo, the largest construction trade show on the American continent, will find a whole range of solutions at the Goldhofer outdoor stand (F7310A) for transporting oversized and ultra-heavy loads more easily Read More ...

India’s Logistics Space Set to Outperform Global Benchmarks

India’s logistics sector was valued at US$ 160 billion in 2018 and is expected to grow to US$ 215 billion by 2020. Today, almost 90% of cargo movement is handled by roadways and railways in the country. Globally, India has the Read More ...

LASO Transportes relies on THP/SL heavy-duty modules by Goldhofer

When the Portuguese special transport company LASO Transportes SA was awarded the contract to transport a 28,8m long and almost 165 t heavy metal component from Vale de Cambra to the port of Leça da Palmeira (about 60 km away) for shipment Read More ...

Mahindra BLAZO established as country’s most fuel-efficient truck

Mahindra Truck and Bus (MTB), a part of the USD 20.7 billion Mahindra Group, has announced that its BLAZO range of trucks has become the market leader in terms of mileage within the trucking industry. The BLAZO range has achieved Read More ...

A new Cometto ETH transporter in UK

Harsco Environmental has taken delivery of a new self-propelled transporter model ETH 8/6 for their site at Sheffield Forgemasters (South Yorkshire). The Cometto ETH 8/6 is designed for operation in steelworks with a payload Read More ...

MEILLER tippers take strain on and under South American roads; carry valuable cargo through Chilean mines.

Chile is one of the most prosperous countries in South America, and one reason for this is its valuable resource – copper – which is primarily extracted in the El Teniente mine in Rancagua, the world's largest subterranean copper mine Read More ...

150 years of Scheuerle Fahrzeugfabrik

From pioneer in modern heavy-duty transport to world leader, Scheuerle Fahrzeugfabrik continues to be a family-owned business that has seen dynamic growth worldwide through innovative heavy-duty transport solutions Read More ...

Sea & Land Integrated Corp investing in Goldhofer axle lines

Sea & Land Integrated Corp., with its headquarters in New Taipei City, Taiwan, is one of the country’s leading logistics service providers. This huge heavy haulage operator already works with 94 Goldhofer PST and THP axle lines, and has now decided Read More ...

Big Data & Tech-Enabled Logistics

Driven by exponential demands, especially with the rise of e-commerce and digitally empowered consumers, the need for efficient and cost-effective supply chain management is becoming even more vital. New age logistics is thus turning to big data Read More ...

Technology Tools & Solutions

To develop India’s Logistics sector, focus on new technology, improved investment, skilling, removing bottlenecks, improving inter-modal transportation, automation, single window system for giving clearances, and simplifying processes Read More ...

PE Funds Inject $1.1 bn into Logistics and Warehousing in 2 Years

Private equity (PE) funds altogether pumped nearly USD 9.7 bn into India’s real estate between Q1 2017 and Q1 2019. Logistics & warehousing is a bright new spot on the Indian real estate heatmap. Infrastructure status, the multi-modal logistics Read More ...
NBM&CW

New Building Material & Construction World

New Building Material & Construction World
MGS Architecture

Modern Green Structures & Architecture

Modern Green Structures & Architecture
L&ST

Lifting & Specialized Transport

Lifting & Specialized Transport
II&TW

Indian Infrastructure & Tenders Week

Indian Infrastructure & Tenders Week