Problems in Indian Logistics Industry
The lack of coordination between central and state governments poses a major challenge for the Indian logistics industry to work holistically.
An additional workforce is needed to meet the growing demand. It is also important to invest in their skill development to ensure quality and efficiency in services.
A wide customer base has led to demanding expectations, including personalized solutions. There is little awareness about using proper modes of transport for different uses and about environmental concerns.
Market trends in Indian Logistics Industry
Population: By 2030, it has been predicted that there will be 41 megacities with populations of more than 10 million people.
Digital Consumer base: Shoppers are buying an ever-greater quantity of goods online has had an impact on the parcel industry, with the proportion of trade accounted for by the business-to-consumer (B2C) sector expected to rise from 29% in 2013 to 36% in 2018.
Greener Transportation: Companies will have to look at ways to use greener methods of transportation, reduce their overall CO2 emissions and cut down on waste from packaging to ensure that they can offer sustainable logistics operations.
To simplify the entire process of generating e-way bills on the GST portal, services in relation to the transport of goods outside India where both service provider and recipient are located in India shall be taxable. Earlier, these services were not subject to the levy of service tax.
After analyzing the problems in the Indian logistics industry and the current market trends, the future of the Indian logistics industry is ripe for digital intervention. A few areas of focus can be:
- Information services: Logistics Control Tower, Analytics as a service
- Logistics services: Urban Logistics, Same Day Delivery
- Improved delivery capabilities: Drones, Autonomous Trucks, Crowdsourcing
- Sharing economy: Shared Transport Capacity, Shared Warehouse Agreement
- Unlocking value in blockchain
1. Information Services
Logistic Control Tower: Control towers provide real-time visibility of the entire supply chain and help companies better react to situations. It helps in increasing response speed and reliability and reducing downtime. These can assist in process execution, analytics, and data integration between different stakeholders. This would lead to the optimization of logistics, increasing customer satisfaction, and reduction in emissions.
Analytics as a service: With the ever-increasing focus on data, the data from the Indian logistics industry can be used for providing services like Demand Forecasting, Maintenance Analytics, Customer Warranty Management, Inventory Optimization, Predictive Asset Maintenance, and Network flow and Path Optimization
2. Logistics Services
Urban Logistics: Urban goods movements account for 20 to 30% of total vehicle kilometers driven. Improvement in urban logistics would lead to a reduction in the number of vehicles in cities. This can be achieved by an increased focus on consumer-related distribution (independent and chain retailing, food deliveries, parcels, and home deliveries) and producer-related distribution (construction materials, waste collection, and disposal, industrial and terminal haulage). Technology can assist in the resurgence of inner-city logistics operations (e.g., couriers, shared inner-city postal hubs)
Same-Day Delivery: Consumers are willing to pay $30 billion in premiums for same-day deliveries. Although it has a negative impact on the environment with an increase of approximately 30 million metric tons in emissions, but40% of the consumers will resort to same-day delivery by 2025. This consumer sentiment would force the Indian logistics industry to shift to same-day delivery
3. Improved Delivery Capabilities
Drones: These are economical, and lead to a reduction in emissions and traffic-related deaths. With an estimated market penetration of 8.5% by 2025, drones can lead to saving in excess of $20 Billion
Autonomous Truck: With AI on the rise, the autonomous truck can be the next best thing with a reduction in fuel consumption, lower maintenance cost, and reduction in traffic-related deaths. With an estimated market penetration of 5% by 2025, autonomous trucks can lead to saving in excess of $30 Billion in Indian logistics industry
Crowdsourcing: By combining the transport of various products in the same truck, crowdsourcing can Increase the utilization of truck companies by 20%. With an estimated commission of 20-25%, it could be a $160 Billion profit-making machine
4. Sharing Economy
For Indian logistics industry, the main applications of sharing economy will be in sharing cost-intensive physical assets, notably warehouses, and freight-transporting vehicles
Shared transport capabilities will involve the creation of vehicle-sharing platforms, where logistics companies can share their information on assets, routes, and fill rates. This would lead to improved utilization levels, saving $30 Billion in operating costs and a reduction in emissions by 680 million metric tons in the Indian logistics industry
Sharing warehouse space could allow companies to carry out order and distribution consolidation in several locations, rather than just one, providing a better cost-to-serve ratio and reducing road miles due to improved drop densities. This would lead to savings in excess of $500 Billion in Operating costs for customers of logistics companies and a reduction in emissions by 1.3 billion metric tons
5. Unlocking value in Blockchain
Potential attributes of blockchain in the logistics industry
- Facilitate origin tracking
- Reduction of transaction costs
- Reduces risk in regard to fraud or counterfeit goods
- Use IoT for vehicle-to-vehicle communication
- Ease paperwork processing
- Effective usage of QR-codes, RFID, NFC tags, WiFi, or iBeacons
- Simplifies the exchange of goods and payment systems
Implementation of blockchain in the Indian logistics industry would lead to faster and leaner logistics with improved transparency and traceability in supply chains, along with automation of commercial processes in logistics and smart contracts
Plan of Action for the Indian Logistics Industry
External Focus: Digitize Customer Experience
Internal Focus: Digitize Operations
Plan of Action:
- Creating an online ecosystem in the Indian logistics industry by enabling digital transformations
- Developing the industry in particular transport modes to operate in a competitive international environment
- Expanding and upgrading the capacity of the industry to enhance its participation in global supply chains
- Intensifying the application of new ICT in the Indian logistics industry
- Ensuring an adequate supply of competent workforce to meet the long-term requirements of the industry
- Strengthening the institutional support through inter-ministry and agency coordination in the planning, implementation, and monitoring of policies and measures affecting the industry
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