Abhishek Chakraborty writes about the key challenges facing the logistics industry while throwing up possible solutions. He also looks into estimated future growth and main growth drivers for the logistics industry.
Logistics is the backbone of the economy, providing the efficient, cost effective flow of goods on which other commercial sectors depend. The logistics industry in India is evolving rapidly and it is the interplay of infrastructure, technology and new types of service providers that will define whether the industry is able to help its customers reduce their logistics costs and provide effective services.
Despite weak economic sentiments, the logistics & warehousing industry continued to witness growth largely due to growth in retail, e-commerce and manufacturing sectors. The Global Logistics sector is expected to grow at around 10-15% in the period 2013-14. With this forward looking attitude and a promise of growth and improvements, the service oriented logistics industry is all set to expand beyond the horizons in the latter half of this decade, utilizing this fiscal year as its launch pad.
Following are the key challenges faced by logistics industry:
One of the major critical challenges faced by companies today is of insufficient integration of transport networks, information technology (IT), warehousing and distribution facilities.
Regulations exist at a number of different tiers, imposed by national, regional and local authorities. Regulations often differ from city to city, hindering the creation of national networks.
Trained Manpower in both the third party logistics sector and the manufacturing and retailing sectors is very weak at a practical level, i.e., IT, driving and warehouse as well as at a higher strategic level.
Lack of Training Institutions
The disorganized nature of the logistics sector in India, its perception as a manpower-heavy industry and lack of adequate training institutions has led to a shortfall in skilled management and client service personnel.
Information and Communications Technology
There are a lack of IT standards and poor systems integration and equipment.
Poor Warehousing and Storage
Poor facilities and management are to blame for high levels of loss, damage and deterioration of stock, especially in the perishables sector. Part of the problem is insufficient specialist equipment, i.e. proper refrigerated storage and containers, but it is also partly down to lack of training.
Lack of research and development (R & D) of the industry
Although both the practitioners and the academicians are increasingly aware of the importance of logistics and supply chain, however the field is still under penetrated as far as research is concerned. It is important to prioritize research and development so that various weaknesses in the industry could be identified and improved.
Possible solutions to some of the challenges:
Needless to say, infrastructure is the backbone of every country’s growth and prosperity and for the logistics industry to flourish in the developed countries, special emphasis has to be laid on the enhancement of the infrastructural facilities. Particular focus needs to be given on building world-class road networks, integrated rail corridors, modern cargo facilities at airports and creation of logistics parks which need to be given a status equivalent to Special Economic Zones.
Creating Awareness & Establishing Training Institutions
Overcoming the skill gap in Indian logistics industry requires establishing training institutions. It is necessary to realize the benefits which best practice in logistics can bring to the companies so that the overall service quality of the sector is improved. Gaps in training have to be filled not only at the entry level but also in the management cadre which could be made possible through specialized graduation and post graduation courses focused on Operations and Supply Chain management.
Improving Warehousing facilities
Good storage and Warehousing facilities are essential to the growth of the logistics industry. With the increase in the transportation of perishable products, agencies associated with logistics will have to give a lot of importance to enhancing the Warehousing facilities. Warehousing will also need to go to the next level taking into account the changing dynamics of JIT manufacturing, global procurement and new models of sales and distribution.
Encouraging Research and Development (R&D)
Emphasizing on R&D is essential mainly because it encourages the use of indigenous technology which can make the industry more cost competitive and it also leads to the improvement in services due to the use of better and more streamlined services. Particular focus needs to be given on research in process excellence which can help eliminate inefficiencies and bring Indian logistics on par with global practices.
Estimated Future Growth:
The Indian logistics sector growth depends on the growth of its soft infrastructure like education, training and policy framework as much as the hard infrastructure. To support India’s fast paced economy growth of logistics industry is very essential. It is estimated that the Indian logistics sector will continue to show robust growth of 10-15% annually, leading the pace of growth of the economy at large.
Main demand drivers:
In 2014 the Global economic outlook and indeed that of India is expected to significantly improve as India Inc begins to tackle the economic downturn. With a new government set to be in place in 2014, many policies are expected to be implemented which will give a fresh impetus to India’s growth engine particularly in the corporate and SME sector which in turn will expand demand for the logistics sector. The biggest boost to the growth of the industry is coming from the increasing consumer demand, particularly in the Tier 2 and 3 sections of the country. This is being further fueled by the revolutionary growth being seen in e-commerce which is leading to logistics companies responding with new innovations in service since logistics is the most critical ingredient in the success of an online business.
(The author is Executive Director – DTDC Courier & Cargo Ltd.)