How Technology Is Shaping India's Logistics Industry

logistics

Traditionally, the logistics spend of developed economies is about 5-6% of their respective GDP whereas in India, it is about 14-15% highlighting the unorganized and fragmented logistics industry. The road network is still under nascent stages of development while the rail network is also under upgradation in India. There is also lack of standardization of assets in the Indian logistical space today leading to either lack of productivity or higher inefficiency. With GST rollout, the regulatory hurdles will reduce which will have a positive impact on transportation. The warehousing sector will be consolidated and will be able to optimize further. Government is also planning dedicated freight corridors for railways which will help to move road freight to rail.

According to our understanding trade and industry promotion, logistics, infrastructure development and introduction of GST initiated by the Government of India will go a long way to ensure a steep growth in this sector. In addition, an expanding e-commerce sector will ensure a growth trend in the warehousing segment. Dedicated freight corridors, increased port connectivity and the constant endeavor of the Union government towards easing of policies and their focus on strengthening the infrastructure (rail, road, ports and airport) backbone are all positive developments in this regard.

In Budget 2017-18, the Government of India has announced heavy investments in the infrastructure sector which is in continuation with their increased focus on infrastructural development over the past few years. The total allocation for infrastructure stands at approx. Rs 4,00,000 crore and the total capital outlay for Transport sector is approx. Rs 2,50,000 crore. The budget allocation for highways alone stands at Rs 64,000 crore in 2017-18. The increased investment in the infrastructure sector spells positive for the logistics players in India. Over the years, a lot of business potential of logistics players has been lost because of infrastructural deficiencies in our country. If things move as planned, logistics business will hugely benefit as building on infrastructure will now be taken care of.

Technology will play a pivotal role for betterment of the industry. With the implementation of IoT, transporting goods to long distances can be done far more efficiently. This is possible by accurately capturing and processing real time data. The logistics of the near future is based upon sensor technology that measures factors like traffic flow, area specific volume and movement of people and infrastructural strength of the area. An efficient transport and logistics infrastructure that is based on the elements of big data and IoT further enable sustainable economic growth. A futuristic logistics system as this also translates to improved economic opportunities, property value creation, affordable housing and reduced vehicular usage leading to lesser transport congestion and air pollution. It would be safe to say that big data and cognitive computing will be the foundation on which an efficient futuristic logistics’ system will be based on.

However, India is a different proposition when it comes to automation. The labour costs, though rising, are fraction of those in developed countries. This makes it challenging to derive required financial benefits from implementing 100% automated warehouses in India. In India, the aim would be to find right balance between automation and labour to get an improved and predictable productivity.

Addition of robots may reduce operating expenses for any ecommerce player. Not only could robots pare labour costs over the long term, they may protect employers against labour shortages, a particularly scary proposition for the biggest retailers during demand surges. Robots can help improve speed and accuracy and increase productivity per square foot of warehouse space at a time when the growth of e-commerce is driving up commercial rents.

We are very optimistic about the future of the Logistics segment in the near future. The sector is expected to consolidate and being an organised logistics player is going to be incentivized. A number of factors contribute to this, the introduction of GST, bigger and automated warehouses, better and standardized vehicles, better infrastructure, thrust on multi modal by the government will lead better growth in the Indian logistics space.