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The Changing Landscape Of Logistics
In Indian business and media circles, GST (Goods and Services Tax) has been the most talked of subject for some years now
Photo Credit : Subhabrata Das
In Indian business and media circles, GST (Goods and Services Tax) has been the most talked of subject for some years now. But there is another phenomenon which is rapidly changing the logistics landscape. This phenomenon is the penetration of ‘technological innovation’ in almost all areas of logistics.
Technology impacts businesses looking to condense the supply chain waste of time and resources, bringing in efficiency in road transportation, rural delivery, logistic infrastructure or the urban first and last mile delivery scheduling. Almost all areas of logistics has technology impacting the ‘business as usual’ — compelling businesses to gear up and get prepared to embrace these changes.
Moreover, in anticipation of the rollout of GST, significant reorganisation of warehousing space in India is in progress. Large hubs are being developed in key areas, coupled with smaller spoke warehouses nearer to production and consumption centres. This reorganisation is leading to significant investment in modern warehousing infrastructure and technology to manage them. Technology used in the warehouses vary from warehouse management systems to warehouse automation and control systems. The expansion of e-commerce around the world has been driving change in fulfilment requirements, which requires greater speed and responsiveness compared to traditional replenishment methods.
Customers today are increasingly using multiple channels to buy products, ranging from retail stores to e-commerce platforms. The logistics industry is adapting to this change and we are seeing new categories emerge — a recent example being, Ekart — the logistics arm of Flipkart. Ekart has begun servicing other e-commerce players, from being a captive company of Flipkart. A series of investments have occurred in reverse logistics companies.
Some others are cutting across industries, like Rivigo, which is backed by venture capital and has raised funds in multiple rounds. The company claims to reduce delivery time for clients across various industries including e-commerce, fast moving consumer goods, automobile, pharmaceuticals and cold chain space.
Developed and emerging markets have become a part of the overall business growth strategy for most MNCs. Companies are becoming more ‘international’ and logistic solution providers need to enable that trend. Thus, growing complexity and dynamism of supply chains require increasingly advanced Information Technology solutions.
No wonder cloud computing has had its fair share of impact on the logistics sector too. Thanks to Software-as-a-service (SaaS), logistics companies no longer have to break the bank to invest in new IT Solutions nor do they need to struggle with legacy systems. Among the new options available to these companies are crowdsourcing platforms, which help gain economies of scale and add the advantage of negotiating better rates, tracking and visibility and benchmark performances. This results in enabling shared efficiencies to help extract maximum value for all the supply chain stakeholders. Venture capitals are heavily backing several such platforms globally and the India market has warmed up to them too. Of course more needs to be done and many more such robust platforms are likely to emerge in the years ahead.
Mark Hurd, the CEO of Oracle, made a bold prediction: “Around 80 per cent of all applications will run in the Cloud by 2025”. Today, he said, “Almost 24 per cent of enterprise applications are in the cloud”. If we see the supply chain market today in India, the adoption might be even lower than 24 per cent, but its gathering momentum and the sector would have to run much faster if the prediction of this IT giant is to be believed.
In the food delivery and local travel industries, technology has induced changes in processes, from the delivery to your home to the change in consumer behaviour towards transportation. No wonder the world is watching out for the Uber or Ola way of doing things. It may not be long before we see the Ola of ‘Freight’. To secure speed to market and to reduce the risk of delays, alternative transport modes and routes are required to support the continuing trend of outsourcing of logistics services. News has already started doing the rounds about pilot testing of drone deliveries of pizzas and parcels in many markets. With the Digital India drive and drones being planned to be used for rural connectivity, India is not going to be left behind in adopting these changes.
This is just the beginning and we are likely to experience more developments, which would change the way business is done. Take for example the role of 3D printing, UAVs, driverless vehicles and the Internet of Things, and the significant role they would play in the logistics space. It seems the future of logistics is paved with innovation and technology.
Just a cursory glance at the two main Indian indices — Nifty and Sensex — reveal that there are no logistics or related companies in the list other than Adani Ports. A highly fragmented market is already starting to get more and more organised. With the adoption of technology this change is going to accelerate and clear market leaders would emerge. We foresee some large acquisitions in both the assets and services spaces whereas consolidation would also be seen in many niche areas which require technical capabilities and expertise. However, in most of the transactions technology would be the central theme to enable consolidation and scale up. Thus, as I-Banks we have to be up the curve, just like technology, to ideate, identify and cook the next big ticket deals in logistics.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.