Indian Logistics: Challenges and Value Creation

The Indian logistics industry is estimated to grow at a CAGR of 8.6% from 2015 to 2020. The dynamic scenario of the Indian logistics sector encompasses not only the buoyancy of e-commerce boost, ‘Make in India’ campaign and enhancement of transport infrastructure but also a few challenges like skill development, low IT penetration and fragmented market.

Challenges of the Logistics Sector:

Skilled Manpower:

For increasing efficiency skilled manpower is the need of the hour. The challenge lies in selection of the right hardware and software along with training and increasing knowledge base of the employees. Saunak Ghoshal, Partner – Technology Consulting, PwC India says, “Lack of skilled resources will pose a challenge in the advanced technology adoption.”

24×7 Connectivity: Maintaining round-the-clock connectivity in a highly fragmented market especially in tier 2, 3 and 4 cities triggered by inconsistent telecom services is fuelling discontent and capacity issues for the logistics industries.

Infrastructure Problem:

Lack of proper infrastructure in the transport sector along with unorganized transport sector is giving rise to the problem of last mile delivery. 75% of all commercial vehicles are owned by a small fleet operators. The result is inefficient utilization of resources and suboptimal services which in turn cause customer dissatisfaction.

Data Security:

Another key deterrent is security and confidentiality of the data. Data breach increases the risk of security issues across the logistics vertical and operational inefficiency. Companies are embracing MDM (Mobile Device Management) to do containerization of the application and BYOD (Bring Your Own Device) apart from adding web application firewall in order to secure data.

Value Creation in Logistics:

The strategic utilization of resources will eventually translate to solutions to all the challenges faced by the logistics industry. Broadly speaking, there are 4 key imperatives to value creation in logistics:

Resource Allocation:

In the geographically varied network of the Indian logistics sector, assets have to be allocated on the basis of current data. This flexibility of assets could evolve into cutting capital expenditures and expanding coverage areas across the globe.

Digital Enablement:

Customers, competition and shareholders are all embracing the digital enabled measures to boost productivity be they digitizing core processes or reinforcing IT-based business models. A well-defined digital strategy customized according to value drivers within existing structures can add to value-added product portfolio and enhance customer relationships.

Dynamic Marketing Strategy:

Including risk management in the experiential marketing and strategy process can help a company build their resources and capabilities whilst making use of the opportunities created. This means adapting service portfolio to changing customs procedure, establishment of free trade zones or incentives for FDIs. Illustrating this aspect is Gati, India’s pioneer in express distribution and logistics management, which encompasses after sales support and reverse logistics as a part of its holistic logistics management solutions. The leading name in logistics also incorporates the features of responsiveness to real-time delivery and flow of goods and services, qualitative yet cost-effective solutions, efficient asset management and dependable services till last mile delivery for maximizing customer satisfaction.

Emerging Markets:

Markets in emerging countries offer opportunities in boosting international trade. The Courier, Express and Parcel (CEP) market is an integral part of the T&L (Transport & Logistics) sector in emerging markets affected by changes in demographics and consumer behavior, be they increase in e-commerce or urbanization. Multinational logistics providers have been targeting emerging countries and according to a projection by PwC in Transportation & Logistics 2030, will enter the domestic logistics market by 2030 by means such as M&As or mergers and acquisitions or by consolidation of logistics markets.

Conclusion

Thus, the logistics sector has to live up to the challenges of the ever-evolving logistics industry by seamlessly integrating supply chain functions with information management, scheduling and free flow of technology-enabled goods and services.