Logistics sector takes digital route

India is now inextricably intertwined with the global economy amidst the rising tide of globalisation. There has been a remarkable shift in consumer demand and expectations as a result of the exposure to the global markets with the logistics sector playing a key role in the process.

According to a Logistics Performance Index rankings published by the World Bank (2017), India is ranked 35th, moving up from the 54th in 2014. It is estimated that the Indian logistics industry will continue to show a robust growth of 10-15% annually, leading the pace of growth of the economy at large.

Challenges faced by logistics in India

The increased investments by the government have led to significant improvements in the sector whilst several challenges continue to dog it. However, the lack of transparency and coordination among stakeholders, such as transporters, fleet owners, consignors and consignees, and the high costs of transportation are some of the major impediments that are still witnessed by the sector. These bottlenecks not only impact efficiency, but also lead to increased wastage of resources due to the poor asset allocation and utilisation.

Adopting digital technologies

To reduce the cost of logistics and increase business efficiencies, several industries such as automobile, retail and manufacturing are now adopting digital technologies that are available to the logistics sector and are being used to re-invent their supply chains. Today, multiple technologies including RFiD, FASTag and IoT are playing a key role in the Indian logistics sector. These technologies have not only improved the operational efficiencies and cargo safety, but have also helped reduce the cost of transport by increasing the speed of freight movement.

The government is also giving a big push to the sector through several initiatives to remove the impediments facing the sector. The formulation of a new logistics division under the Ministry of Commerce has helped bridge the communication gap between the government and the stakeholders. Earlier, the sector was being overseen by seven ministries, which created a chasm between them in messaging when it came to communication.

Additionally, initiatives of the government to provide infrastructure status to the sector, the rollout of GST, implementation of the E-Way Bill and the launch of a state-wise logistics index has helped the sector turn into an organised sector. These initiatives have immensely influenced the supply chain.

Impact on supply chain

As being witnessed across the country, the application of technology in the logistics sector and the initiatives taken by the government have benefited the industry. They are also having an impact on the supply chain in the following ways:

n Optimal utilisation of resources: The logistics industry in India is currently highly fragmented and unorganised. Several issues such as the wastage of resources due to the high dwell time at toll booths, unassured return load, the lack of a proof of delivery and breakdown of trucks due to the poor condition of roads, have made it necessary for the stakeholders in the industry to have a bird’s eye view. Technologies such as cloud computing are providing a solution to these challenges. Several players in the sector are making use of the technology and are now able to collaborate and share information in real time onto the cloud-based platform.

n Increased visibility and coordination among stakeholders in the supply chain: Managing supply chains is a very complex process and includes multiple stages of transactions between various parties. Due to so many processes and manual data entries, there are high chances of errors and duplication of documentation. Blockchain, which is extensively used in cryptocurrencies, is now being widely adopted by companies in the logistics sector.

Conclusion

The sector currently faces a lot of challenges and needs to adopt innovative approaches to stimulate growth. In the past, supply chain involved both paperwork and electronic processes. This could lead to mismanagement among the various players in the sector. With digital transformation of the supply chain, businesses are now using new approaches to meet the rising consumer needs.

According to a recent report from McKinsey, the digitisation of the logistics sector will have a huge impact on the effectiveness of the supply chain, leading to a 30% reduction in operational cost. Overall, digitisation of the logistics sector and transformation of the supply chain will lead to a change in the delivery of value, eliminate the challenges of the existing hybrid supply chains and will create unique opportunities.

(The writer is CEO and Co-founder of Fortigo)