Why technological innovation in ecommerce logistics is key for MSME efficiency

India's economic growth and stride toward becoming one of the top three economies in the world mainly depends on the success of its vibrant and strong MSME sector. A TPCI (Trade Promotion Council of India) report stated that the industry contributes around 33% to the GDP and its total exports will surpass $1 trillion by 2028. Besides the increase in tangible goods production and exports, the sector's impressive performance can be attributed to the technological advancements and their adoption in the past couple of decades.

The limitations in conventional business models have been addressed through innovation in ecommerce which has enabled MSMEs to cater to a broader range of customers with limited resources. However, accuracy is critical, especially when a business ventures into new markets. A study by Descartes and SAPIO Research suggested that 73% of customers experienced delivery failure, resulting in 23% never returning to the retailer. As per the report, the most critical issues have been delays, i.e., delivery not arriving at the promised time and the duration for delivery.

Hence, the MSME sector must look at a solution that not only addresses the existing challenges in logistics but also help in gaining customer loyalty in a highly competitive business environment. And here, the integration of the latest technologies can do wonders.

Data analytics and its role

An MSME can utilise the latest technologies, such as data analytics, to gain insights into different aspects of a business. For instance, with proper systems, a business owner can track product sales, categorise products into fast- and slow-selling goods, and obtain region-wise details.

Based on critical insights from AI/ML programs, a decision-maker can optimise inventory management, improve production processes, streamline the supply chain, and focus primarily on profitable products and regions. This further ensures better ROI for the business, which is critical, especially for an MSME, due to limited capital resources.

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Adoption of IoT

The Internet of Things (IoT) can be a game-changer for the logistical requirements of MSMEs. IoT works on collaborating real-time data with intelligent algorithms that provide inputs on road/traffic conditions, carriage performance, and other challenges faced in the supply chain process. This implies that a business has enough information to choose better delivery routes while considering distance, traffic, delivery windows, and vehicle capacity. This improved delivery experience eventually results in a higher customer satisfaction level.

Route optimisation can help reduce fuel consumption by almost 20% and decrease total transport costs by 10-20%. Furthermore, it results in increasing the delivery efficiency by nearly 30%. All these numbers add up and contribute to higher profit margins of MSMEs. 

Warehouse and inventory efficiency are two other areas where IoT can be critical. Besides real-time inventory management, IoT can help reduce waste, prevent lost or misplaced inventory, and perform predictive maintenance. 

Blockchain in logistics

Blockchain is one of the world's fastest-growing disruptive technologies, exhibiting an average CAGR of 60% for the next decade.

In logistics and supply chain management, blockchain can reduce costs by 90% and improve time savings. It can also create a shared, immutable ledger that records all the transactions and movements in the supply chain. This can help stakeholders track the product journey from origin to destination, improving traceability and transparency. Furthermore, blockchain can help reduce fraud, build trust, and increase supply chain efficiency, which is critical for any enterprise.

MSMEs have just started leveraging blockchain in logistics and supply chains, and there is a significant scope through which this technique would help make a difference for the entire sector.

(Zaiba Sarang is Co-founder of iThink Logistics, a tech-enabled end-to-end courier aggregation service.)