logistics firms are moving from traditional set-ups towards an integration of IT and technology to reduce the costs incurred and meet the service demands, says Sumit Sharma
logistics is regarded as the backbone of the economy, providing efficient and cost effective flow of goods on which other commercial sectors depend. Despite of the weak economic sentiments, the logistics industry continues to witness growth due to the progress in retail, e-commerce and manufacturing sectors.
Recent scenario
The 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 business industry as well as policy-makers. The role of managing this infrastructure and to effectively compete has been slightly under-emphasised. 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 infrastructure in the short-run while providing cutting edge competitiveness in the long-term.
Prospects
Firms are moving from a traditional set-up 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 in this sector depends upon its soft infrastructure like education, training and policy framework as much as the hard infrastructure.
The global logistics sector was expected to grow 10 to 15 per cent in the period 2013-14 and is expected to reach over $2 billion by 2019. 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.
With the implementation of Goods and Services Tax (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 point of sale (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 their customers. Thus, all this has paved the way for further growth of logistics and warehousing industry in the coming years.
Challenges
The challenge faced by the industry today is insufficient integration of transport networks, information technology and warehousing and distribution facilities. Regulations exist at a number of different tiers, is imposed by national, regional and local authorities. However, the regulations differ from city to city, hindering the creation of national networks.
Trained manpower is essential both for the third party logistics sector as well as the manufacturing and retailing sectors, which is very weak at a practical level, ie, IT, driving and warehouse as well as at a higher strategic level. The disorganised nature of the logistics sector in India, its perception as a manpower-heavy industry and lack of adequate training institutions has led to a shortfall in skilled management and client service personnel. There is a lack of IT standard, equipment and poor systems integration.
Poor facilities and management are the reason for high levels of loss, damage and deterioration of stock, mainly in the perishables sector. Part of the problem is insufficient specialist equipment, ie 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 prioritise research and development so that the weaknesses in the industry can be taken care of and improved.
Solutions
For the industry to flourish, special emphasis has to be given 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 realise that the benefits which can be practiced in logistics industry can be brought about by the companies by establishing training intuitions, so that there is improvement in the overall service quality of the sector. Good storage and warehousing facilities are an integral part of its growth. With the increase in the transportation of perishable products, the logistics agencies needs 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 Just-in-time 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.
(The writer is co-founder of GoBOlT, a tech-logistics company in New Delhi)