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India’s logistics sector takes to technology to adapt to evolving business environment

India’s logistics cost as a percentage of GDP at 14 percent is higher than the BRICS average of 11 percent. The sector is poised for a change, driven by tech solutions and policy reforms.

August 17, 2022 / 02:52 PM IST
(Representative Image)

(Representative Image)

India’s logistics efficiency has improved dramatically in recent years and technology-driven integrated solutions and structural reforms are set to transform a sector that is largely unorganised, with almost 80 percent of the industry run by small or medium-sized companies that rely on manual and conventional working methods.

“Real-time order visibility, automated approvals, and digital billings are now not a privilege but a basic necessity for logistics professionals,” said Sanket Sheth, founder of Elixia Tech Solutions Ltd., a company that offers software solutions for logistics, supply chain management, and transportation.

The government is also working on various policies and infrastructure developments to streamline the logistics process, including making drones more user friendly.

“Now, the focus is on the development of the logistics sector on both the macro and micro levels, thus I personally expect a positive change in the dynamics of the Indian logistics industry,” Sheth added.

Logistics is considered an apt barometer of the economy’s health, but it is not a self-thriving industry and is totally dependent on how other sectors function. Its pivotal role — and weak spots — were on display after the onset of the pandemic in 2020, which affected almost all business operations in every sector and every part of India.

Growth potential

The importance of logistics came to the fore at the time of the pandemic especially when essential commodities had to be delivered across the length and breadth of the country. These included fast-moving consumer goods and pharmaceutical sector products such as oxygen cylinders, vaccinations, and medical aid.

The size of the Indian logistics market was about $250 billion in FY21 and it is estimated that this sector will grow to $380 billion by 2025, at a compound annual growth rate of 10-12 percent.

E-commerce, retail, FMCG, and pharma are the few sectors that grew during the past five years and witnessed a major surge in demand after the onset of the pandemic.

India’s traditionally poor logistics has been the “leak” that reduces the competitiveness of its industries. Benjamin Franklin said, “Beware of little expenses, a small leak will sink a great ship.”

That holds great relevance for India’s economic growth. According to industry data, India has a higher logistics cost as a percentage of GDP at 14 percent compared with the BRICS (Brazil, Russia, India, China & South Africa) average of 11 percent.

Logistics in India had always been driven by traditional processes such as paper-based documentation, manual involvement, and on-ground labour force management and hence, there was a point where things came to a standstill during the lockdown.

After the Covid-19 outbreak, hyperlocal delivery companies sprung up as demand increased for grocery, food, and pharma products. These factors called for more developed and technology-advanced logistics and transportation solutions and contributed to positive growth over the past five years.

A report by the World Economic Forum indicates that by 2025, digital transformation in the global logistics industry will be valued at $1.5 trillion. Hence, for any product-based direct-to-consumer brand, a certain level of investment in the logistics division would be imperative for growth. Also, as per the industry data, India’s automation market is expected to grow at a CAGR of 13.2 percent during 2022-26.

Drone deliveries

The government of India recently amended its drone policy to make it more friendly for logistics companies and end-users of products.

Drone-facilitated last-mile deliveries for the retail, healthcare and FMCG sectors can bring about tremendous benefits to the Indian logistics sector and contribute to the economy.

“Apart from fast deliveries and efficient logistical operations, the adoption of drones can reduce shipping costs by about 80 percent and though drone deliveries won’t really affect the dynamics of mid-mile logistics in the near future, it will definitely be a game-changer for the last-mile logistics sector in India,” said Sheth of Elixia. He said 60 percent of last-mile deliveries globally will be done via drones by 2030.

Companies including Elixia Tech, FarEye Technologies and Freight Tiger (Freight Commerce Solutions) are among the technology startups that are aiming at revolutionizing the logistics sector in India through their innovative array of delivery solutions for all logistics segments and modes of deliveries.
Gaurav Sharma
first published: Aug 17, 2022 02:52 pm