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India’s Logistics Sector Poised For Growth And Innovation Amidst Pandemic
There is a huge explosion of Direct-to-consume (D2C) brands seeking to bring the very best of "Made in India" products directly to the customer's doorstep.
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It is a known fact that the pandemic brought significant changes in the corporate landscape and have compelled many companies and individuals to reinvent themselves to remain relevant. The traditional logistics industry, for instance, was pretty unorganised until half a decade back and is now witnessing a significant shift towards digitisation and contactless operations. While on the demand side, many customers that traditionally operated offline went online, there is a huge explosion of Direct-to-consume (D2C) brands seeking to bring the very best of "Made in India" products directly to the customer's doorstep.
Madan Sabnavis, Chief Economist, CARE Ratings reveals, “Logistics will witness an uptick post covid as the focus will progressively be on the entire supply chain of doorstep delivery. This means specific thrust on warehousing and packing/packaging to enable the smooth flow of goods. Warehousing will see a thrust mainly due to the higher farm produce to the market. The development of eNAM bodes well for building more warehousing space as farmers move to the market.”
It is to be mentioned that the domestic logistics industry is highly fragmented and consists of over 1,000 active players which include large scale domestic players, leading entities of global players, the express arm of the government postal service and emerging start-ups specialising in e-commerce deliveries. As per research reports, the estimated size of the Indian logistics market is pegged at US$ 215 billion and is growing at a CAGR of 10.5% and only 10-15 per cent of the overall market is owned by organised players. Out of the aforesaid amount, the online vertical is estimated between US$ 20 and US$30 billion by 2025.
“Growth in this industry is dependent on several factors. Firstly, higher growth in GDP which goes with a recovery entails higher movement of goods across the country. Secondly, warehousing today is an integral part of the e-commerce industry which is booming. Furthermore, the growth of the food processing industry in particular will lead to growth in private demand for warehousing space. Above all, growing exports will increase demand for efficient logistics services to cut costs and become more competitive,” Sabnavis from CARE further added.
As per a recent report by Arthur D. Little India in collaboration with the CII, India’s Logistics and supply chain costs currently amount to a staggering US$400 billion, up to 14% of the GDP, compared to the global average of 8%, raising a competitiveness gap of approximately US$ 180 billion.
New-age firms up the ante….
The booming e-commerce sector, which is witnessing robust growth in India since the last decade, has also facilitated many start-ups dealing in logistics to establish their business. As per TechSci Research, many such new-age startups such as BlackBuck, Delhivery, Rivigo, Blowhorn, Freightwalla, etc., have solidified the supply chain to bridge the gap in the fragmented and unorganized logistics industry in India.
For instance, Blowhorn has seen tangible improvement in the performance during the pandemic with volumes increasing by 50%+ compared to the pre-COVID era. “While the sector was deeply impacted, with the implementation of the right interventions, our business picked up rapidly. Our margins have improved and our customer base has diversified and expanded by over 50%,” Mithun Srivatsa, CEO, Blowhorn.
Similarly, Locus, a technology platform that uses machine learning and proprietary algorithms to automate complex supply chain decisions, has seen 2.75X growth y-o-y since 2016. “The rapid growth of hyperlocal deliveries, e-commerce, and e-grocery; and the emergence of D2C brands. Customers are now at the centre of the supply chain and want to decide the how what, and where of every delivery, “avers Krishna Khandelwal, Chief Business Officer, Locus.
Likewise, Freightwalla, a digital freight forwarder, was able to save 100,000 papers in 2020 through digitalization and is looking forward to increasing it to 20% -30% in 2021. “The digital freight forwarding way is the future of freight forwarding. What has been done for the past maybe 100 years in a conventional way, we are doing away with that,” reveals Sylvester D'Mello, Director-Operations, Freightwalla.
Interestingly, World Economic Forum (2016) had claimed that the digital transformation of the global logistics sector could translate into a value of US$ 1.5 trillion for the participants and an additional US$ 2.4 trillion worth of societal benefits by 2025,
2021 and beyond….
While infrastructure readiness and technology are expected to be the key drivers of growth for the Indian logistics industry, a number of trends will drive this growth and all will involve the adoption of technology for tactical and operational decision making, routing, fleet optimisation, data analysis, or strategic. Moving forward, Internet of Things (IoT), Automation Technology, Blockchain technology, Cloud Computing, Advanced / Big Data Analysis, Artificial Intelligence (AI) and Robotics are expected to be leveraged by market leaders in this domain to provide end-to-end lean and smart logistics solutions, thus enhancing quality, reducing cost and minimising human intervention.
According to the recently released report of NITI Aayog and Rocky Mountain Institute (RMI), titled 'Fast Tracking Freight in India: A Roadmap for Clean and Cost-Effective Goods Transport', India can save Rs 3.11 lakh crore worth of fuel by 2050 and reduce 10 gigatonnes of carbon dioxide by 2030 by deploying a clean and cost-effective mode of goods transportation.