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BW Businessworld

India’s Logistic Market: Synchronised Logistics

India’s logistics market is expected to grow at a CAGR of 10.5 per cent from now until 2025 spurred by faster adoption of modern technology, e-enabled fleet, and warehouse management solutions. All this is also attracting big money

Photo Credit : Shutterstock

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Had it not been for the disruption caused by the coronavirus pandemic, the logistics and supply chain industry — the backbone of global trade and services — would not have moved in a hurry to engineer the adoption of IoT, machine learning, and artificial intelligence in their day-to-day operations.

“The disruptions caused by Covid-19 are making global companies rethink their supply chain strategy. Two major areas that are likely to see great traction are improved visibility across supply chains (both for cargo shipments and documentation) and drawing a balance between just-in-time and just-in-case,” says Sanjay Bhatia, Co-founder & CEO at Freightwalla, a digital freight forwarder.

Although Bhatia says that India has a long way to go to catch up with the latest market trends whilst catering to the evolving needs of overseas buyers, the technological transformation of India’s logistics and supply chain industry is well and truly underway.

As per a recent ‘white paper’, logistics companies in India and elsewhere have already embarked upon accelerated inclusion of technology in key areas of logistics and supply chain management. These include use of IoT in fleet as well as warehouse management, use of robotics in inventory management, adoption of real-time, satellite-based tracking of goods and fleet and use of electric vehicles (EV) in select areas.

However, some players are moving faster than others, and have set their own priorities as far as technology adoption is concerned. A recent study by HERE Technologies shows that about a third of logistics companies in the Asia Pacific (APAC) region are considering IoT (37 per cent), warehouse automation (33 per cent), and electric vehicles (32 per cent) as key investment priorities in the next two years. As for Indian companies, 38 per cent will be ploughing more investments in IoT, while 29 per cent are showing high interest in warehouse automation and 10 per cent in electric vehicles.

Abhijit Sengupta, Director & Head of Business, India, SAARC region and SEA, HERE Technologies says, “With the emerging technologies within transportation and logistics space and the resultant market disruptions, customer expectation is continuously evolving. This inevitably positions the industry for exponential growth in the coming years.”

In June, a NITI Aayog report titled ‘Fast Tracking Freight in India: A Roadmap for Clean and Cost-Effective Goods Transport’ revealed that India has the potential to reduce its logistics cost by as much as 4 per cent of its gross domestic product (GDP) while achieving savings of 10 gigatonnes of cumulative CO2 emissions between 2020 and 2050.

“Freight transportation is a critical backbone of India’s growing economy, and now more than ever, it’s important to make this transport system more cost-effective, efficient, and cleaner. Efficient freight transport will also play an essential role in realising the benefits of existing government initiatives such as Make in India, Aatmanirbhar Bharat, and Digital India,” said Sudhendu J. Sinha, Adviser, Transport and Electric Mobility, NITI Aayog.

NEW-AGE PLAYERS

Signs of change are already evident. FedEx Express, a subsidiary of FedEx and the world’s largest express transportation company, and India’s Delhivery, a leading logistics and supply chain services company, recently entered into a partnership aimed at optimising gains in the logistics market. This is how it is expected to work. FedEx will make a $100 million (Rs 740 crore) equity investment in Delhivery and enter into a long-term commercial agreement. While FedEx Express will focus on international export and import services Delhivery will, in addition to FedEx, sell FedEx Express international products and services here locally.

As per reports, FedEx will also transfer some of its assets belonging to its domestic business in the country to Delhivery. In fact, Delhivery, one of the leading e-logistics companies in the country, is set to launch its initial public offering (IPO). Experts estimate its valuation at $4 billion as it plans to offload 10-15 per cent for around $500-600 million (roughly Rs 3,500- Rs 4,200 crore).

In May Delhivery had raised $277 million, expected to be the final funding before the proposed IPO later in 2021. Delhivery disclosed in the regulatory filings that it had raised $277 million from a clutch of global investors including Boston-headquartered Fidelity, Singapore’s sovereign wealth fund GIC, Abu Dhabi’s Chimera, and U.K.’s Baillie Gifford.

There are several such examples from the recent past where millions of dollars have been invested by global and local investors in e-logistics firms. BSE-listed India Infoline or IIFL, a diversified financial services firm along with Amicus Capital and Ananta Capital have just announced a $12 million (about Rs 85 crore) Series B funding for logistics and warehousing solutions provider Pickrr Technologies. Existing investors Omidyar Network India and Guild Capital also participated in this round. The funding will help the company continue to drive product development and expand its network of fulfilment centres across the country, according to a statement.

What is Pickrr and how does it work? Pickrr’s platform helps e-commerce businesses simplify shipping and/or returns. It dispatches, manages and tracks orders (or returns) through a single dashboard. It works with leading shipping partners across India like Blue Dart, Ecom Express, DTDC, FedEx, Delhivery, India Post, Shadowfax, among others. Pickrr raised its first-ever institutional round last year when Guild Capital and impact investor Omidyar Network India backed the company with a $4 million (Rs 29.45 crore at the time) infusion.

In fact, most of the listed logistics companies have seen a big uptick in their stock prices recently due to growing investor interest.

BETTING ON GROWTH
Why are global, local, and every other kind of investors betting big on Indian logistics and supply-chain networks? Vaibhav Khandelwal, Co-founder & CTO, Shadowfax Technologies says, “The development of robust, more advanced transportation management systems have redefined the way supply chains are working now. Increased visibility, enhanced connectivity, streamlined data storage and assured safety all make it much more efficient. Brands these days are making efforts to get closer to their customers and reduce the overall delivery time, thereby catalysing the growth of micro-warehousing centres.”

Sudarshan Shreenivas, Director, CARE Ratings echoes Khandelwal. “The pandemic provided a boost to the online market. Since the conventional stores were closed consumers moved online to buy goods creating a surge in demand for last mile deliver y ser vices. Thus, the B2C segment of the supply chain/express delivery flourished. Accordingly, the need for warehouses increased mainly near to the consumer.”

The upcoming players in the market are realising all this and proactively bridging the gap between what was and what can be. With increased government focus on digitisation, it is easier now to focus on consumer behaviour, and data sharing. Consequently, the logistics industry is getting leaner, efficient, and a lot more collaborative across the chain.

TECH AS A DISRUPTER
Technology has always been the biggest disrupter in any industry and the logistics space is no different. From last-mile delivery and sustainability solutions to automated pickup at warehouses and predictive optimisation software, technology is making a huge difference in the logistics sector.

AI and digital technologies play a crucial role in saving time, reducing costs, increasing productivity, and helping companies in providing near-to-precise delivery time.

Startups are quick to recognise this and are addressing the gaps head on. Ramasubramaniam B, Co-founder & COO, BlackBuck notes,“BlackBuck is addressing the fragmentation challenge by digitally bringing both the shippers and the truckers to a common platform, creating trust amongst them and providing them access to pan-India trucking network rights at their fingertips.”

The idea of specialising in integrated, digital and AI driven supply chains and logistics may be new to India but they are getting adopted by new-age e-logistics players because going digital is the logical step forward. Experts say that technology stored and deployed in the cloud also makes realtime tracking easier and faster for all parties connected to the modern-day supply chain and logistics business. While the internet of things (IoT) provides deeper insights into individual processes, AI looks at the aggregate, delivering a holistic 360 degree view of the business. It is imperative to look at supply chains in their entirety, and not as a standalone but as an end-toend ecosystem in itself, say experts.

The demand for robotics goodsto-person (G2P) services is also set to expand rapidly. Automation is enhancing productivity and improving storage density within warehouses, helping brands in better utilisation of space. With the immense potential that technology could bring into the value chain, there will be a lot of innovations happening in intra-city logistics. With the recent government reforms and the interest from the enterprises, use of digital intervention for last-mile deliveries is going to be very high.

THE LONG ROAD AHEAD
While all these developments are positive, there is still a long road ahead. Logistics in India is still largely perceived as a traditional business that is done in a set way. Moreover, there are challenges arising from lack of infrastructure and an unorganised network which means fragmented hubs and warehouses. Also, since most of the logistics infrastructure remains restricted to the urban areas, the hinterlands are left largely neglected.

The irregularities at the lower levels of the supply chain amplify while they reach higher stages, thus creating a wide gap between what the consumer wants and what companies supply. A lot of players have to also recognise that investments are needed to adapt and change the processes and that these measures will pay back handsomely in the long run.

Khandelwal notes, “Most of these independent players have a very small fleet size and carry most of the freight in the area they are present. Over the last couple of years, we are seeing a slight shift towards companies preferring the organised sector for their freight movements.”

Small logistics startups have to step up their game if they wish to compete with the larger companies. The established brands already have the resources and the ability to absorb risks of the trade whereas most logistics startups or even those companies that have been around for a while have neither. While some platforms have adopted modern processes like enterprise resource planning (ERP) and electronic data interchange (EDI), the sector as a whole still has a long way to go.

In addition, there are a lot of groundlevel realities that companies have to contend with. For instance, rising fuel costs are increasing the transportation costs for the logistics companies. Then, these companies need to invest strategically to train the workforce and make them future-ready so that they can efficiently cope with any challenges that may come in their way of conducting and managing the business continuity. The workforce also needs to be trained in areas like conduct, presentation, and customer service to improve their journey and enhance customer experience and satisfaction.

A lot of logistics companies are recognising these problems and looking to bridge the gaps. To optimise fuel consumption, the companies might go for consolidated shipments reducing the number of carriers which, in turn, might have an impact on delivery schedules and timelines. Moreover, having trained and experienced professionals to manage the new-age supply chain seamlessly is the need of the hour.Digitaltechnologies have evolved faster than ever in the last few years.

According to experts, in order to bridge the gaps in processes and technology India can also adopt good practices from other countries or rope in international companies as technology providers. There are industry players that are already catering to these demands.

“We have offerings such as proprietary line-haul network, last-mile distribution using automated and intelligent information systems, network capabilities enabling cash-on-delivery (COD), prepaid and reverse pick-up. We are constantly upgrading our technologies and have come up with automated warehousing, order management and fulfilment centre services,” notes T. A. Krishnan, CEO, Ecom Express.

A slew of measures and initiatives announced by the government, both directly and indirectly, are serving to give a fillip to the logistics industry.

To begin with, the introduction of GST and the rationalised tax slabs have served to make life easier for majority of the players in this industry by drastically reducing paperwork.

The government is also making a conscious effort to introduce multimodal logistics parks across the country. These parks, which will be spread over 100 acres, will provide warehouse facilities including cold storage.

Further, the introduction of the eway Bill will eliminate checking at state boundary posts increasing the overall turnaround time.

The Vahan and Sarathi platforms that facilitate online vehicle registration and driving license issuance respectively, too, will help the industry by eliminating delays and standardising the processes.

With the government pushing for digitisation, green economy, an ‘Atmanirbhar Bharat’ and Make in India products, the trajectory for the logistics economy can only be upwards.