The Indian logistics sector, approximately $200 billion in size, is set to grow at over 10 percent CAGR in the next five years to reach $320-330 billion. A robust logistics sector can go a long way in the quest to become “Atmanirbhar Bharat,” and in our aim to become a $5 trillion economy. As we continue to focus on manufacturing capabilities, the performance of the logistic sector is both compelling and compulsive.
Characterised as an unorganised sector, the logistic industry is grappling with many inefficiencies. Road transport is particularly deeply fragmented—truck owners with fewer than five trucks constitute more than half of all goods vehicles on the road.
Trucks account for ~69 percent of the country-wide freight traffic in India, according to the Economic Survey 2018-19, and the cost of Indian logistics is 13 to 14 percent of the GDP vs only 8 to 10 percent of the GDP for the developed nations.
So, the question is – how do we organise this sector, and how do we use technology more efficiently to bring economic benefits for the country as a whole?
Here are the three areas that look promising to me:
Use data analytics extensively
Agriculture, with its allied sectors, is still the largest source of livelihood in India. Even the logistics move into the regions where farming is dominated. From January to March, which is the peak harvesting season, most of the truck drivers move northwards for business. This movement happens for both organised as well as unorganised players.
Lack of data and information availability makes it difficult to know the real demand in those regions, and the capacity which is required to be diverted towards the agricultural output. This unsystematic migration adds to the challenges of the sector and further aggravates the issues of unorganised logistics.
Data analytics can significantly contribute here. Various heat maps can be generated to study the location-wise movement of goods, required capacity at various points in time, and thus, the actual logistics requirements. This is one of the best tools to reduce information asymmetry. It helps in deploying the capacities more systematically and with better accuracy.
Whenever the rush is towards essential items like food items, these data analytics can come in handy for those dealing in non-essential or consumer durable goods. They can create backup plans and schedule the deliveries in more refined ways to have minimum disruption to their logistics.
Technology helps in tracing and tracking both. The demand and supply convergence is thus scientifically possible using technology. The outcome is – efficient, accurate, and organised mobilisation of resources.
Bring accountability with transparency
One step forward, we have to look at technology as an enabler to bring more accountability. Transparency and visibility help in systematic mobilisation. However, to create a difference in experience, we need to increase dependability and build trust.
For that, we have to inculcate responsible behaviour with complete ownership of the task. Starting from truck loading to the last-mile of delivery, everything should be allocated and executed using the system/tech platforms.
From the moment the truck is allocated, every change of hands should be logged through the process flow in the system. This will ensure a structured and common process is followed by all, accelerate the process of spotting the area of concern and, in turn, timely fix issues, and lastly, it will facilitate more data analytics which can be used for further developments and improvements.
Add economic value to the whole of the supply chain
The third important element is to bring economic value and making the business financially viable for all the stakeholders and business partners. Today, it is possible to digitise every single transaction. The bidding process, managing multiple vendor contracts, documentation like e-invoicing, transfer management system connecting all three delivery miles, all these should be digitised.
Apart from the physical movement of goods, everything should move online including payments to the trucking partners. This will ultimately bring cost efficiency and financial credibility.
Eliminating redundancies and avoiding duplications can bring cost efficiencies benefiting both logistic partners as well as customers.
With all the payments happening online, truck drivers can easily produce their financial records while approaching financial institutions for taking any personal or vehicle loans. Element of financial credibility enhances as the truck drivers not just benefit from clean records but also through quick payments.
The Indian logistics sector must introduce innovative models, digital transformation, and an adequate implementation approach to the execution. The sector offers promising growth opportunities and technology can help building scale and speed both together assuring positive economic returns.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YS.)
