At the brink of transformation: current scenario of Indian logistics, challenges, scope

During Budget 2019, it was announced that Indian customs plans to fully digitise its transactions      and utilise RFID technology to improve export logistics. This, along with a few other developments such as the grant of ‘infrastructure’ status to the logistics sector and a substantial increase in the number of tech-focussed startups has spelt great news for Indian logistics in recent times.

A largely ignored and conventionally-run industry dominated by a number of small players and inefficient operations, logistics has turned a digital leaf, considerably boosting India’s prospects when it comes to building a sustainable supply chain.

Ecommerce: driving the change

The growth story of Indian ecommerce during the last five years is nothing short of a fairy tale. Along with its sprawling success, ecommerce has also immensely boosted the prospects of logistics sector. This is further complemented by the implementation of GST, which streamlined the state-wise tax structure and ensured seamless movement of goods. According to Economic Survey 2017-18, the Indian logistics market is expected to reach about $215 billion in 2020, growing at a CAGR of 10.5 percent.

The growth is driven by emerging ecommerce retailers from Tier II and III markets, a corresponding increase in demand and the entry of more foreign corporates in the FMCG segment, propelled by India’s upward movement in Ease of Doing Business Index. With a favourable regulatory environment highlighted by the grant of infrastructure status, Indian logistics enterprises can now have easier access to funding opportunities to drive technology driven operational transformation.

Developing an integrated framework

However, cohesion is still lacking in Indian logistical growth. Smaller, unorganised players still eat up a large segment of the customer base, setting a lower benchmark for operations while influencing pricing as well. The inefficiency of these players has even encouraged ecommerce players such as Amazon to develop their own cutting-edge logistical fleet, equipped with drones and RFID/sensor-based technologies that optimise the entire process. Such a trend enhances competition for the dedicated logistics players, and only those which are able to incorporate digitised processes driven by Artificial Intelligence (AI) will be able to thrive through this onslaught.

Existing infrastructural and cost inefficiencies need to be addressed as well. This includes a fragmented warehousing and inadequate material handling infrastructure and a still poor integration with modern information technology. One of the main points of focus, however, is the improvement of last-mile delivery framework.

According to industry experts, a significant part of the inefficiency creeping in today in the logistics segment is due to a faulty last-mile connectivity framework.

However, few players have managed to develop a robust last-mile delivery structure, through a strong franchise-based model that involves constant engagement with the franchise owners to offer a unified consumer engagement experience.

Logistics forming the backbone of Indian economy

The Indian logistics sector provides a livelihood to over 22 million people, which in the next couple of years is expected to grow significantly. Equipping the sector with the latest digital technologies and automation in operations would lead to a 10 percent decrease in indirect logistics costs, placing India in good stead with countries like the US, China and Japan when it comes to both domestic as well as international trade.

The recent opening of ports such as Chabahar further promise a growing international trade setup for India, particularly with high potential markets such as Iran and Afghanistan and other middle-eastern countries. An integrated logistics policy that removes hierarchies and interactions with multiple agencies, effective monitoring and a complete tech-driven approach can help India’s logistics sector leapfrog into becoming one of the most promising sectors of the Indian economy.

The government has already formed a national committee headed by the Cabinet Secretary to reduce the logistics cost from 14 percent currently to 10 percent by 2022. Such constructive steps, if taken frequently and with solid intention, leveraging the best of technology, can surely develop a strong, efficient logistics sector, empowering the Indian economy to achieve the goals it has set for itself.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)