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How technology will overcome challenges in the traditional logistics and transport business

How technology will overcome challenges in the traditional logistics and transport business

Thursday May 11, 2017,

6 min Read

Imagine yourself a decade ago. Waiting for public conveyance while constantly staring at your watch, calling your taxi driver who claims he’s ‘just around the corner’ for the past 15 minutes, and, at times, discovering that you’ve been mugged in broad daylight thanks to the exorbitant fares that the autowala charged to a certain destination. Things surely have changed over the course of time, and they’ve changed for good!

The driver of this change has unquestionably been technology – Information Technology to be more precise. It has given you the opportunity to accurately locate your transport, has brought certainty in your fare estimates, and even enabled you to track the next bus or train approaching your location in real-time. However, the merits of technology are not merely reaped by public transport users. They are enjoyed as much by private vehicle owners who can now avoid routes fraught with traffic, ensuring that they reach their destination approximately as per their ETA (Expected Time of Arrival). But can’t these developments also be leveraged by the traditional logistics and transport businesses? They surely can be. That too, on a much greater scale.

What drives the growth of the logistics industry?

Logistics industry, which is pegged at USD 115 billion right now, is the backbone and a very integral part of the country’s trade and economy. According to the government’s estimates, it is expected to clock a growth rate of 12 percent Y-o-Y and will achieve a net worth of USD 360 billion by 2032 – more than threefold of its current market size. But if technology is leveraged by the industry for its operations, it has the potential to reach USD 307 billion by 2020.

The advent of smartphones in India has already acquainted the Indian population with digital technology in an unprecedented fashion. Smartphones, today, are fast becoming the basic necessity of Indian consumers who perform an array of operations through their digital devices. It enables them to interact with a distant relative, shop without bearing with the scorching sun, book their movie tickets at the touch of a button, and even watch a live cricket match while they are on the go! There’s an application for almost everything. This increasing dependence of the Indian populace has further fuelled the demand for mobile applications for almost every process, even logistics. This gives businesses the leeway, rather a full-fledged opportunity, to open themselves to a larger market by coming under the ambit of digital technology.

The current state of logistics industry in India:

But as we witness digital adoption across all walks of life, a very basic question also begs an answer. Why has the logistics industry largely remained unaware of this development? The answer to this question is also quite simple. Every business requires sustainability. And it becomes all the more complicated to offer the same to logistics operators. Logistics businesses execute a gamut of operations across wide-ranging geographies, which is achieved through their consolidated business model. Adopting an entirely new business concept can have serious repercussions on their businesses. Also, they are now largely aware about downsides of burn rates that online platforms bear, and that this financial burden is sooner or later transferred to them as the monetary benefits are withdrawn. This further restricts their digital adoption.

The objective of digitising the logistics industry can only be fulfilled by weaving technology into their existing business models, and not by forcing an entirely new business notion on them. In this regard, only a franchisee-led business model can offer sustainability. It not only eliminates the underlying apprehension of logistics operators, but also enables them to retain higher control over their businesses along with the desired flexibility.

Despite this, there are a plethora of other challenges for logistics platforms to counter that the industry currently faces. India endures a financial burden of approximately 14 percent of its GDP on logistics operations. Bringing the US figure of 6 to 7 percent in contrast, and you have significant room for improvisation. Also, Indian trucks on an average cover 150 to 200 km per day, whereas, in US and China the same is 700 to 800 km and 350 km respectively. While infrastructure within the country is constantly improving, leveraging appropriate technologies to make these operations more time-efficient can unlock promising avenues for the Indian logistics industry.

The role of technology in logistics operations:

Factors that diminish the efficiency of the logistics industry are also wide-ranging. They include sporadic load discovery, warehouse and inventory management, slow freight movement, high transportation expenses, as well as transparency within operations. The increased competitiveness within the market also mandates the transporters to strictly abide by the Service Level Agreement. Failing to reach within the mandated time makes them liable to penalties, which accumulates significant financial burden annually. But timelines are quite hard to maintain, especially on Indian roads.

This is precisely where technology has a role to play. The advantages of IoT (Internet of Things) infrastructure – including smartphone-based location determination, vehicle sensors for multiple use cases, and RFID-based critical cargo tracking – can offer higher visibility to a business with regards to its operations. The data generated by the IoT devices can, moreover, help a business to evolve much more dynamically. It also enables them to factor in road conditions, traffic patterns, as well as weather to ensure that vehicles strictly adhere to mandated timelines. Vehicle breakdown, an uncertain event that can prevent the delivery of a critical package, can also be eliminated with Big Data. It takes into account the vehicle condition and through historic data, can identify automobiles which require maintenance without affecting the supply chain. It also help a business to pinpoint rogue drivers who are more likely to disturb the operations through traffic violations and by even getting involved in an accident.

Geo-fencing can, moreover, prepare the forward supply chain for an upcoming shipment, thus increasing the time-efficiency of a business. This can enable the vehicle to make more roundtrips in a shorter duration of time. While avoiding routes affected with traffic will not merely minimise the shipment delivery time, it will also substantially reduce the fuel idling which accounts for considerable transportation expenditure. The location-based real-time visibility of the freight movement can improve last mile delivery capability, and can also enable the transporter to swiftly execute emergency responses.

Technologies such as these can automate the entire process for which businesses need to allocate higher resources to manage manually. It will also unlock avenues for modelling real-life conditions, encountering and eliminating unrealised operational inefficiencies, and also in demand forecasting for better asset deployment.

As the logistics industry has largely remained unaware of such technological developments, there’s massive room for disruption within the sector. But the transport players can only be on-boarded if the new-age platforms understand their specific requirements before coming up with their unique business propositions. However, the augmented activity within the sector is an indication that the industry is not far from coming under the purview of technology.