Challenges facing the Indian logistics sector

Shipping Containers at Terminal

 

Aditya Deorukhkar

Aditya Deorukhkar

In India, around 10-15 percent of the product cost can be attributed to logistics.   Compared to economies of the USA, the European Union or China – this is a very high percentage. Aditya Deorukhkar highlights some of the challenges faced by the logistic sector in India.

 

The logistics and supply chain management sector is fragmented in India. Generally, it is an informal sector performing logistics tasks, largely with low-tech technology and support and without dedicated warehouse area. Moreover, majority of logistics service providers consist of only a few personnels owning one or two trucks. The sector, as a whole, is not very organized and the workload is very volatile, especially in the big cities, where there are a vast number of unorganized small truck owners and service providers providing stiff competition at razor thin margins.

 

India with its vast demography brings its own challenges. With the issues like safety, inefficient regulations, governing risks, etc – in the supply chain, it may not be easy to revive and evolve the behaviour from within the unorganized sector, towards more safe and structured one. Human risks are a major issue in India compared to European countries. Providers mostly overload trucks which lead to an enormous rate of deaths since they generally do not consider investing in security measures due to cost reasons. Storage and warehouse related risks are also of concern; the fragmented private logistics companies do not interface with logistic chains, thus opening another avenue of business risk.

 Graph 1

Regulation in India sometimes borders on over-regulation, which is a major or constricting factor. But having said this ironically in certain ways, there is a lack of regulations and regulation implementation through out the country.

 

With regard to trucking, there is a high tendency to overload and many a times they over-speed in order to meet their time limits.   Also, safety regulations are very poor which gets worse considering substandard road and traffic conditions. An example, TATA trucks have a capacity of 12 tons, but loads of less than 18 tonnes are exceptions, since people either do not care or simply do not know any better. Hence, there is a high rate of accidents at loading facilities and on roads. Safety laws do exist, but their implementation and enforcement is very problematic.

 Graph 2

Regarding infrastructure, the government has dedicates some routes exclusively for trucks. But the major problem is that there is no standardization of the quotes of logistics service providers.

 

The Indian railways are still a monopolistic organization considering logistics, with a huge network and an integrated system including 16 zones and 75 divisions, which is not yet ready to be opened up for private ownership. This institution is a department of the government and a huge entity with approximately around 100,000 employees. However, it remains a single inflexible company that has difficulties to associate with outside partners. Even though there are initiatives for improvement, they all need to be approved through a very long and inefficient internal process.

 

Considering the ports for logistics operations, data from Indian Ports Association shows that ports in India suffer from high turnaround times for ships. JNPT, which is the premier port in India, has more than  two-times the turnaround time than Colombo and Singapore ports because of congestion on berths and slow evacuation of cargo which are unloaded at the berths.

 Graph 3

Inadequate depth at ports is also of concern. The depth at many ports in India is not enough and dredging tenders take a long time in getting awarded. As a result, with the existing depths many ports are not able to attract very large vessels. Coastal shipping in India is hampered by inadequate port and landside infrastructure, which hampers large-scale use of it for freight movement.

 

Finally Air cargo has also not taken off significantly in India. With increased volumes of cargo, major airports are getting congested resulting in long waiting time. The waiting time for exports in India is 50 hours compared to a World average of 12 hours while the waiting time for imports in India is 182 hours compared to a World average of 24 hours. Also the airfreight sector suffers from high fuel costs and tariffs as well as several manpower issues.

 

Considering Logistics as a career option, it is still not perceived as an industry of choice for young graduates. Therefore hiring of quality professional manpower is a challenge.

 

A recent study has found that a variety of skills are required in the sector. These include technology skills, driving skills including safety procedures, industry understanding and multi operations skills. The present state of affairs is illustrated by example of a truck driver in India, who is a critical point of contact for the logistics company with its customers where the truck drivers today find it difficult to accurately log delivery records, understand delivery documents, negotiate for return business, handle queries etc.

 

(The author is Chief Growth Officer – Aditya Enterprises and COO – Infinity Logistics.)

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