Logistics / Transportation – Thought Leadership
Overview of the logistics industry in India
Logistics plays a vital role in a country’s economy and generally refers to the system in place to manage the way resources are obtained, stored, and transported to where they need to go. Part of logistics management is identifying efficient and reliable distributors and suppliers. It’s a sector that can give a country a competitive edge when it comes to exports because a strong logistics infrastructure is necessary to ensure smooth shipments.Logistics is a critical industry that includes all supply chain activities, from transportation and inventory management to customer service and the flow of information. It not only impacts the success of a country’s supply chain but can also influence it on a global scale. The effectiveness of logistics helps to determine how well enterprises can meet customer demand.
India’s logistics are a vital part of the country’s economy, estimated to account for about 14.4% of GDP. More than 22 million individuals depend on it for their income. To further develop this important sector of the economy, the Department of Commerce’s logistics division for India was established on 7th July 2017. The Special Secretary to the Government of India is responsible for leading the division and developing an action plan to facilitate the overall development of the logistics sector through policy changes.
The Indian logistics sector is vast and complex, with 37 export promotion councils, 40 Participating Government Agencies (PGAs), 20 government agencies, 10,000 commodities, and 500 certifications. The unorganised sector makes up the vast majority of the logistics sector at 99%, which includes small-scale truck owners, transport company affiliates, small warehouse owners, customs brokers, and freight forwarders, among others.
The global indices show how much the logistics sector has progressed and developed in recent years. India’s exceptional score of 90.3% in the United Nations ESCAP’s Global Survey on Digital and Sustainable Trade Facilitation, conducted in 2021, is a huge improvement from its score in 2019 of 78.5%. This is due to the gains made in the scores of five important indicators.
Some Major Challenges faced by the logistics industry in India
freight transport in India is done mainly by road, which is about 60%. However, this method is not effective because of the many checks, traffic congestion, and poor road infrastructure. Also, rail transport takes up 32% but is too expensive for many businesses.
High Order Intensity Ratio
Indian logistics companies are feeling pressure to keep up with the supply-chain timetable as they have been facing an influx of orders. It is becoming more difficult to manage all of the orders and keep track of what needs to be sent out and when.
This problem is only made worse when the organisation doesn’t have enough money due to lengthy payment cycles. Generally, festival season is the worst time for these issues as there are massive delays in delivery schedules and a complete failure of the ETA system.
Reducing Transportation Costs
The cost of shipping and transportation is a huge issue in the industry and can often add up to half the value of the product. With gas prices on the rise, shippers need to find ways to cut costs without sacrificing the quality of service. One way to do this is by using multiple shipping providers so that you can compare rates and services. Many manufacturers and merchants entrust their entire shipping needs to one or two shipping providers to save money.
Unreliable shipping is a common issue in India despite on-time packing and drops. The nation is vast with different landscapes and climates, which makes logistics difficult. The roads are in bad condition, while the Ghats are dangerous with landslides and accidents.
Logistics companies and firms waste time and money because of traffic jams, several checkpoints, and toll booths. Even after accounting for delays, there’s still room for more backlog.
The Shortage of Drivers
It seems that there are not enough drivers to meet the current demand in the sector. Unfortunately, this means that the hiring process is lengthy and costly, and it will continue to be so for some time. However, you can better use your drivers’ time by planning better routes.
Complex GST & IT Rules
There are a few key difficulties that Indian logistics firms face due to the country’s convoluted tax system. Road travel is significantly slowed down because there are many state and federal fees. One big issue is the condition of storage facilities and their restricted sites.
For low-margin items, storage facilities are highly dispersed, making it difficult to establish one central warehousing facility.
Future Scope Of the Logistics Industry In India
India’s logistics have become increasingly important due to the rise of nationwide consumerism. This has created a huge demand for professionals who are skilled in logistics, making an academic degree in this field extremely valuable. The Logistics department needs people who are skilled in analytics, data management, and warehouse management.
Additionally, students with training in the logistics industry have various opportunities to work in fields such as e-commerce, warehousing, shipping, aviation, etc., which enables them to widen their career growth. Professionals who specialise in logistics play an important role in large companies. This is because their responsibilities are crucial for the growth of the company and they often receive excellent salary packages.
Logistic in India is expected to reach about USD 330 billion by 2025. Several factors, including improvements in digital technology, shifting consumer preferences brought on by eCommerce, governmental reforms, and changes in service sourcing strategies, will lead to the transformation of the Indian logistics ecosystem.
After a brief period of setbacks due to the pandemic, the industry is now returning to its pre-pandemic growth trajectory.
The government’s initiatives to improve the logistics sector will help it progress and become more efficient. The integration of a multi-modal network of transport and warehousing will allow for better transportation and storage of goods throughout the country. By focusing on the digital aspect, the government hopes to upgrade the existing system and make it faster and more accurate. This will benefit the sector significantly.
The plan has a strong monitoring system with periodic audits. The audits will check the implementation of policies and required corrective measures. With the aforementioned initiatives, India intends to raise its ranking in the Logistics Performance Index to 25 and reduce the logistics cost from 13% to 8% of GDP.
This would reduce the logistics cost by approximately 40%. These goals were set by the National Logistics Policy. The policy would guarantee the logistics industry acts as a growth engine and a significant factor in upgrading India to a US$ 5 trillion economy.