One of the most robust industries currently in India, the logistics sector is poised to grow at a CAGR of12.17% by the year 2020, all thanks to growth trajectory seen in the manufacturing, retail, FMCG as well as ecommerce industries. Moreover, the country spends approximately 14.4% of its GDP on logistics and transportation; other developing countries spend only 8% of its GDP.
The above figures are proof of the importance of logistics in a vast country like India with nooks and corners still cordoned off from the metropolitan cities. Considering the various terrains in the country, logistics plays an important role in making food and other livelihood products available in the country.
Challenges of the Logistics sector
Even though logistics is one of the fastest growing sectors in the country, it is plagued by some unique challenges that have no immediate solution in sight. While there are many challenges hampering the growth and reach of the sector, few of the recurrent challenges are:
1. Complex organisational structure
While the term ‘logistics sector’ might imply one single entity, in reality, the sector comprises of different segments, which together constitute the sector. There are shippers, logistics service providers, logistics hubs as well as regulatory bodies. Not only are these individual entities, they are fragmented in terms of processes as well as working. The entire life cycle of pick up to delivery involves multiple processes and vendors. With some transitioning from one point to another, the chances of faltering are high as well. As a result, you can never really guarantee end-to-end satisfaction to the customer.
2. Poor quality infrastructure
For a country like India which is the seventh largest country in the world and covers an area of 3214 kms from North to South and 2933 km from East to West, logistics is a complex process. Adding to this, is the poor infrastructure in the country – poor road network, high air freight charges, massive turnaround time at sea ports etc. All these coupled together attribute to the sub-par performance of the logistics sector. Moreover, with connectivity (road as well as telephone network) issues, the sector is not able to reach out to most of rural India.
3. Less technology adoption
Even though India is a hub for IT solutions and provides solutions to the rest of the world for the smooth functioning of their business, the Indian logistics sector is still far from leveraging technology in the real sense when it comes to boosting operations. Across many tier 2 and tier 3 cities, logistics processes are still done manually – right from weighing the package to documentation. Moreover, the logistics sector has the ability to play an important role in providing value driven solutions and hence the need for technology adoption is more than ever.
IT adoption key to the success of logistics sector
The low adoption of information technology in the logistics sector is the biggest challenge for the sector. The IT sector has, since the early 90s, been an enabler for many other sectors in the country. As a problem solver, IT assists in tightening the loose ends that a particular sector might be facing.
However, the job of IT solution providers isn’t only to put out a solution to tackle the problem. What is important is that IT engineers build products and solutions which are easy to use, easy to comprehend and easy to adopt as well. In addition, what is important is that end consumers are able to understand the functionality of the IT solution and use it optimally, instead of abandoning the solution mid way because the process was lost in translation.
For instance, an IT solution for the logistics sector has to be such that even drivers can comprehend easily since we cannot expect people from that segment to be tech savvy and understand the entire IT functionality of the solution. The IT engineer needs to take into account the fact that the end user will not understand the nuances of how a mobile app works. Hence, the thought process behind the IT solution should be such that it makes the life of the end user easier, rather than ‘technology complicated’.
There are many IT solution providers who are building marketplace IT models to manage intracity as well as intercity truck and load management. These solutions are provided to the end consumer (mostly drivers) via mobile phone apps. However, the IT solutions provider doesn’t understand those drivers in Tier 2 and 3 cities. Hence, IT solutions providers need to focus on ‘simplifying the complexities’ and ensure that they to bridge the gap and transfer the requisite knowledge and awareness for the solution to work effectively.
The marketplace model to bring together truck drivers who traverse intracity as well as intercity routes is essential and a great idea. However, for this to be a sustainable model, it requires support and adoption across audiences, and hence, a model, which caters to the requirements of the logistics industry as well as the knowledge base of the end consumer, is imperative.
Author Bio: This article has been authored by Mr Amit Singal, CEO, Sainergie Consultants.