The Scenario of Logistics in India

Logistics is regarded as the backbone of the economy, providing an efficient and cost-effective flow of goods on which other commercial sectors depend. However, with the pressure of not passing the incremental logistics costs to the end-consumer, companies try to cut back on the logistics costs involved.

With organizations having such contemplating choices, the logistics industry in India is seen to be evolving rapidly. It is the interplay of infrastructure, technology and new types of service providers, which defines whether the logistics industry can help its customers reduce their costs in the logistics sector and provide adequate services.

Despite the weak economic sentiments, the logistics industry continues to witness growth due to the increase in retail, e-commerce and manufacturing sectors. The Global Logistics sector was expected to grow 10-15% in the period 2013-14 and is expected to reach over USD 2 billion by 2019. 2019 will see more supply chains pursue omnichannel strategies in logistics, eliminating inconsistencies and disparate systems and creating a cohesive, shopping experience for consumers. Rise of e-commerce logistics and increased domestic consumption will lead the way for the industry in the coming years. With a promise of growth and improvements, the service-oriented logistics industry is ready to expand beyond the horizons in the latter half of this decade.

Recent scenario

The new Indian logistics sector comprises of inbound and outbound segments of the manufacturing and service supply chains. Of late, the logistics infrastructure has gained a lot of attention both from the business industry as well as policymakers. The role of managing this infrastructure, to effectively compete has been slightly under-emphasized. Inadequate logistics infrastructure has an effect of creating bottlenecks in the growth of an economy. The logistics management regimen has the capability of overcoming the disadvantages of the support in the short run while providing cutting edge competitiveness in the long term. There exist several challenges and opportunities for the logistics sector in the Indian economy.

Challenges faced by the recent logistics industry in India

The essential problem faced by the industry today is insufficient integration of transport networks, information technology, and warehousing & distribution facilities. Regulations exist at several different tiers, is imposed by national, regional and local authorities. However, the rules differ from city to city, hindering the creation of national networks.

Inadequate facilities and management are the reason for high levels of loss, damage and deterioration of stock, mainly in the logistics sector. Part of the problem is insufficient specialist equipment, i.e., proper refrigerated storage, and containers, but it is also partly down to lack of training. The practitioners and the academicians are now aware of the importance of logistics and supply chain; however, the field is still under-penetrated as far as research is concerned. It is essential to prioritize research and development so that the weaknesses in the industry can be taken care of and improved.

Solutions to some of the challenges

Infrastructure is the backbone of every country’s growth and prosperity and for the logistics industry to flourish particular emphasis has to be on building world-class road networks, integrated rail corridors, modern cargo facilities at airports and creation of logistics parks which need to be given a status equivalent to Special Economic Zones.

It is necessary to realize that the benefits which can best be practiced in the logistics industry can be brought about by the companies by establishing training intuitions so that there is an improvement in the overall service quality of the sector. Proper storage and Warehousing facilities are essential for the growth of the logistics industry. With the increase in the transportation of perishable products, the logistics agencies need to give a lot of importance to enhancing the Warehousing facilities.

Warehousing is required to go to the next level taking into account the changing dynamics of manufacturing, global procurement and new models of sales and distribution. Emphasis on research and development is potent mainly because it encourages the use of indigenous technology which can make the industry cost competitive and can also bring about improvement in services thereby using better, effective and efficient services. Particular focus has to be on research in process excellence which can help to eliminate inefficiencies and bring Indian logistics on par with global practices.

Prospects

The logistics firms are moving from a traditional setup to the integration of IT and technology to their operations to reduce the costs incurred as well as to meet the service demands. The growth of the Indian logistics sector depends upon its soft infrastructures like education, training, and policy framework as much as the hard infrastructure.

To support India’s fast-paced economic growth of the logistics industry is essential. It is estimated that the Indian logistics industry will continue to show robust growth of 10-15% annually, leading the pace of growth of the economy at large.

The global economic outlook, indeed that of India is expected to improve significantly as India Inc begins to tackle the economic downturn. With a new government, many policies are expected to be implemented which will give a fresh impetus to India’s growth engine particularly in the corporate and SME sector which in turn will expand demand for the logistics sector.

With the implementation of GST, the logistics companies, which are currently forced to set up many small warehouses across multiple cities can set up just a few, big warehouses region wise and can follow the hub-and-spoke model for freight movement from the warehouses to the different manufacturing plants, wholesale outlets, retail outlets and the various POS. This growth is backed by the boom in the e-commerce sector and expansionary policies of the FMCG firms.

This has increased the service geography of the logistics firms, but they also have to meet the demands of quick delivery and tight service level agreements. The industry has moved from being just a service provider to the position which provides end to end supply chain solutions to its customers. Thus, all this has paved the way for further growth of Logistics and Warehousing industry in the coming years.

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