Logistics Industry Outlook, challenges, and technological developments

Sumit Sharma
By Sumit Sharma, Co-founder of GoBolt, a next gen Tech-Logistics company in Delhi.

Logistics is regarded as the backbone of the economy, providing efficient and cost- effective flow of goods on which other commercial sectors depend. The logistics industry in India is evolving rapidly, it is the interplay of infrastructure, technology and new types of service providers, which defines whether the logistics industry is able to help its customers reduce their costs in logistics sector and provide effective services.

Despite of the weak economic sentiments, the logistics industry continues to witness growth due to the growth in retail, e-commerce, and manufacturing sectors. The Global Logistics sector was expected to grow 10-15% in the period 2013-14. The logistics industry is expected to reach over $2 billion by 2019. The rise of e-commerce, logistics and increased domestic consumption will lead the way for the industry in the coming years. With a promise of growth and improvements, the service oriented logistics industry is ready to expand beyond the horizons in the latter half of this decade.

Logistics Industry

Recent scenario

The recent Indian logistics sector comprises inbound and outbound segments of the manufacturing and service supply chains. Of late, the logistics infrastructure has gained a lot of attention both from business industry as well as policy makers. The role of managing this infrastructure, to effectively compete, has been slightly under – emphasized. Inadequate logistics infrastructure has an effect of creating bottlenecks in the growth of an economy.

The logistics management regimen has the capability of overcoming the disadvantages of the infrastructure in the short-run while providing cutting-edge competitiveness in the long-term. There exist several challenges and opportunities for the logistics sector in the Indian economy.

Challenges faced by the recent logistics industry in India

The most essential challenge faced by the industry today is insufficient integration of transport networks, information technology and warehousing & distribution facilities. Regulations exist at a number of different tiers, is imposed by national, regional and local authorities. However, the regulations differ from city to city, hindering the creation of national networks.

Trained Manpower is essential both for the third party logistics sector as well as the manufacturing and retailing sectors, which is very weak at a practical level, i.e., IT, driving and warehouse as well as at a higher strategic level. The disorganized nature of the logistics sector in India, its perception as a manpower-heavy industry and lack of adequate training institutions has led to a shortfall in skilled management and client service personnel. There is a lack of IT standard, equipment and poor systems integration.

Poor facilities and management are the reason for high levels of loss, damage and deterioration of stock, mainly in the perishables sector. Part of the problem is insufficient specialist equipment, i.e. proper refrigerated storage and containers, but it is also partly down to lack of training. The practitioners and the academicians are now aware of the importance of logistics and supply chain; however the field is still under penetrated as far as research is concerned. It is essential to prioritize research and development so that the weaknesses in the industry can be taken care of and improved.

Darshan Roadlines

Solutions to some of the challenges

Infrastructure is the backbone of every country’s growth and prosperity and for the logistics industry to flourish special emphasis has to be on building world-class road networks, integrated rail corridors, modern cargo facilities at airports and creation of logistics parks which need to be given a status equivalent to Special Economic Zones.

It is necessary to realize that the benefits which can vastly be practiced in logistics industry can be brought about by the companies by establishing training intuitions, so that there is improvement in the overall service quality of the sector. Good storage and Warehousing facilities are important for the growth of the logistics industry. With the increase in the transportation of perishable products, the logistics agencies need to give a lot of importance to enhancing the Warehousing facilities.

Logistic

Future prospects The logistics firms are moving from a traditional setup to the integration of IT and technology to their operations to reduce the costs incurred as well as to meet the service demands. The growth of the Indian logistics sector depends upon its soft infrastructure like education, training and policy framework as much as the hard infrastructure.

The global economic outlook, indeed, that of India is expected to significantly improve as India Inc begins to tackle the economic downturn. With a new government many policies are expected to be implemented which will give a fresh impetus to India’s growth engine, particularly in the corporate and SME sector which in turn will expand demand for the logistics sector.

With the implementation of the GST, the logistics companies, which are currently forced to set up many small warehouses across multiple cities can set up just a few, big warehouses region wise and can follow the hub-and-spoke model for freight movement from the warehouses to the different manufacturing plants, wholesale outlets, retail outlets and the various POS. This growth is backed by the boom in the e-commerce sector and expansionary policies of the FMCG firms.

This has increased the service geography of the logistics firms but they also have to meet the demands of quick delivery and tight service level agreements. The industry has moved from being just a service provider to the position which provides end to end supply chain solutions to their customers. Thus, all this has paved the way for further growth of Logistics and Warehousing industry in the coming years.

Technology & Development

In developing countries like India, the development in logistics is quite different from other countries. Technological innovations and advancements are currently the governing mechanism for selecting supply chain partners, coordinating and monitoring the end to end process delivery. Technology has brought several innovations in logistics. There are several recent technologies such as the internet of things, mobile, augmented realty, social media, cloud storage, big data analytics and computing which improves the efficiency of the logistics operations.

The addressable market for a tech logistic company is of US$40bn. India needs more than 10 companies to scale upto more than USD 1 billion in revenues in this space (intercity full truck load) to make Indian Logistics Industry efficient. Tech logistic startups like GoBOLT have given emphasis on the following elements to deliver value to its clients and other stakeholders:
  • Unique hybrid operating model: It operates through an innovative model involving combination of owned, dedicated and marketplace fleet for control over the operation, balanced capital deployment & risk management.
  • Monitoring the vehicles & every process - With the help of technology, monitoring of vehicles can be done accurately. One can send the proper updates to customers alongside the estimated time of reaching the destination.
  • Drivers’ ecosystem getting changed - Life of truck drivers are getting better because there is a fixed rotational shift allocated to each and every driver. Now, the drivers are having a GPS tracker in their vehicles which is enable them to reach their destinations without any hassels. Also, trucks are not heavily loaded because of proper segmentation. Hubs have been created to provide them proper shelter, food and a place to rest after a driving span of 8 hours. Another driver will continue the journey and so on.
But everyone has to maintain a uniform time for covering a particular distance, so that the goods reach to the destination in time. The company will monitor the same simultaneously. Trucks are well maintained and have modern facilities which enable the drivers to avoid exhaustion and pilferage or spoiling of the goods to be delivered. Lifting & Specialized Transport — January - March 2018
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