November , 2020
Digital transformation in logistics industry
11:27 am

Aritra Mitra

A number of challenges impacted the Indian industries during the complete lockdown period – labour shortage, cargo capacity challenges, manufacturing slowdown, delayed orders, stuck shipments etc. The manufacturing halt further reduced demand for logistics services that resulted in downward pressure on prices across warehousing, freight and logistics. As an integral part of the supply chains, logistics companies facilitate trade and commerce and help businesses get their products to customers. Supply chain disruptions impacted economic growth, competitiveness and job creation. In order to combat the challenges of the sector during the pandemic, an integration of technology took place in the logistics industry leading to a digital transformation of the logistics sector.

Digital transformation

The session ‘Reimagining Indian logistic and supply chain in the age of uncertainty’ at the CII Logistics and Supply Chain Leadership Conclave 2020 stressed on re-engineering processes, paperless and contactless documentation, capacity enhancement and multi-modal transport. Supply chain is no longer just about moving packages. It has become a part of key business strategy, to be discussed at board meetings.

Reacting to how the pandemic has helped in the digital transformation of the logistics sector, Praveen Vashistha, Founder and Director of Gxpress told BE, “Aviation is one of the worst-affected segments. The Indian government has suspended all passenger flights, only allowing movement of cargo flights. Air carriers prioritise the transportation of essential cargo and critical pharma/medical equipment. Staff shortages and delays in clearance of cargo have resulted in congestion at airports. The Internet of Things, blockchain, 3D printing, and autonomous transportation have gained renewed interest as technologies that will help companies survive and thrive during a pandemic or another crisis.”

Vaibhav Khandelwal, CTO and Co-Founder, Shadowfax in the article, ‘How innovative technologies can redefine the logistics industry post Covid-19?’ for entrepreneur.com stated that there is a need to rethink on the supply chain operations and the system upgradations for real-time digital tracking of orders, automatic tracking and alerts, route optimisations and enhanced navigational abilities. The companies also have to be careful of protecting and supporting the people working in the logistics systems while developing the new systems. He further wrote, “There is another pressing need for technological adoption in the industry. The very nature of the logistics industry exposes it to maximum risks. The industry is, therefore, experiencing a paradigm shift in the very foundation of its operations—the new pillars of the logistics industry are contactless deliveries, location tracking, and early spotting and segregating the risk—all of which can be managed only through technological integrations.”

Manufacturing industry influencing logistics

According to several industry insiders the strengthening of the manufacturing base in turn impact the growth of the logistics industry. Initiatives like ‘Local for Vocal’ and ‘Make in India’ are crucial in strengthening the base of the economy. Vashistha said, “India imported $480 billion worth of goods from various countries around the globe in 2019. Pandemic therefore exposed the extreme dependence of our country on imports from other nations. Now, MSMEs and the big manufacturing industries are trying to ameliorate themselves in terms of new products, technology and innovation. This is helping to revive the logistics companies so that manufacturing industries can showcase their products overseas.”

Challenges and prospects

In the logistics sector, especially the low margin goods and cargos incur a lot of damage because of pest-infested warehouses, lack of storage space, leakages etc.  The governments use the biggest warehouses to store grains, which leaves very little space for cargo storage. The layered and multiple tax structures also cause a loss of time to logistics companies on the road. Vashistha stated, “Due improvement in the technology and the logistics firms understanding the need to integrate themselves completely on the tech-platforms have improvised the situation for the warehousing issues. Warehouse automation helped in achieving operational efficiencies to counter supply-chain cost pressures in the industry.”

The logistics market in India is forecasted to grow at a CAGR of 10.5% between 2019 and 2025. While talking about the prospects of the logistics sector, Vashistha stated that it is expected that the growth of the logistics industry will be supported by the e-commerce industry.  Logistics start-ups in India gained a substantial foothold after the e-commerce boom. Online platforms have increased competition and lowered freight costs with real-time data availability and a transparent value chain. Hence, it is crucial for logistics service providers to innovate and adapt to the transforming logistics landscape.

Government intervention

In order to improve this sector, government intervention in terms of freight tariff structures, introducing one nation, one permit, one tax system and incentivising the trucking industry along with the introduction of a new institutional framework is required. In this context, Vashistha added, “Government should also allow the foreign companies to open their factories in India, thus enabling more job opportunities and increasing their dependence on the logistic firms in India. The need of the hour is to formulate an integrated logistics policy. The integrated logistics policy could go a long way in streamlining and consolidating multi department requirements, besides facilitating corrective action, effective monitoring and prompt grievance redressal.”

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