Future Trends in Indian Logistics industry
India has become the prime destination for logistics service providers all over the world. The demand for logistics services in India has been largely driven by the remarkable growth of the economy.
The growth is being projected at 9-10 per cent in next few years, with the compounded annual growth rate (CAGR) expected to grow at a rate of 7-8 per cent. This growth is expected to gain greater momentum due to the exponential growth of the Indian economy.
India is also experiencing a big retail boom as the buying capacity of the middle and upper middle segment of the population has scaled new heights. Many large multinationals from the retail industry are planning to set up operation in India and large local retailers are also planning to expand their operations.
But with the infrastructure largely under-developed and incapable of catering to a growing economy, logistics management in India becomes too complex. The poor condition of infrastructure directly translates to higher turnover, pushing up the operating costs and reducing efficiency. There are other problems such as complex regulatory compliance and limited adoption and utilization of technology, which has resulted in increased paperwork and inability to communicate effectively with customers.
In spite of dismal infrastructural scenario, the hopes of the logistics sector are kept up by the various upcoming infrastructural projects like logistics parks and hubs and other initiatives by public and private sector. The future of the logistics sector depends not only on the continued development of infrastructure but also on the capability of the service providers in adapting themselves and making optimal utilization of technology.
India – Emergence of a global manufacturing hub
The demand for FMCG and electronic products in India has been growing at a very fast pace. Several multinational companies from diverse industries have shown growing interest in setting up world-class manufacturing facilities in India to cater to the domestic market as well as for the export market.
Establishing manufacturing facilities in India has been a strategic move to reduce their manufacturing costs and cater to the expanding Indian market.
The Indian automotive industry is well on its way to being one of the world’s major automobile manufacturing hubs. Since the deregulation and opening up of the automotive industry, the industry has witnessed tremendous changes and experienced a great boost.
As an outcome of the growth in the automotive industry, the automotive components industry has also witnessed significant growth with the country becoming home to many world-class auto component suppliers.
Warehousing:
Warehousing has become one of the major segments contributing to a rapidly growing Indian logistics industry. The growth in international trade and a rapid rise in containerization levels have led to high demand for warehouses and a tremendous opportunity for the private sector. The demand for specialized services is expected to further drive the growth in the market. There has already been a sizeable impact on the industry, in terms of market size, growth and the infrastructural resources. The numerous investment options in the warehousing market have heightened the interest of players entering the market, which is already evident from the growing number of players in the warehousing market. Several initiatives have been taken by the Government towards the development of warehousing sector. The introduction of Goods & Services Tax (GST) regime and Warehousing Act 2007, investments in logistics parks and free trade warehousing zones (FTWZs) have aided in the development of infrastructural facilities. The change in tax policy has had significant impact on investments by the logistics providers in warehousing segment and has opened the gates for largescale investments. There is tremendous competition between major private and public players in the market. The continued development of warehouse infrastructure will go a long way in providing the necessary support to the logistics industry. The infrastructure development in the warehouse segment is expected to get further fillip with the introduction of new regulatory and development bill.
Indian logistics: Future trends
There have been several key indicators to the future trend in the Indian logistics sector. The demand for logistics services has been largely driven by the remarkable growth of the Indian economy. Logistics spend in India is estimated to be around 13 per cent of the GDP, which is comparatively higher than other developed countries.
The air transport sector’s contribution has been around 0.2 per cent of the country’s GDP, while the transport sector’s contribution to the GDP has been growing over the last couple of years.
India’s air cargo is predicted to grow at over CAGR of 11.5 per cent in the next few years.
The contribution of the marine transport sector has also been around 0.2 per cent to the country’s GDP. The sector’s contribution to the GDP has been increasing mostly because of the growing economic developments in the country. The role of the shipping industry in the growth of Indian economy has been very significant. Major ports in India together have handled around 500 million tonnes of cargo in the past two years and this figure is growing significantly.
The Indian Railways has realised the necessity to improve the infrastructure provide better service. The plan to develop logistics parks or hubs has the potential to streamline and optimize the supply chain and reduce the costs. Currently around 80 per cent of the goods in India move by road, the railways has to essentially devise plans to divert this traffic to the rail.
India’s logistics sector attracted huge investments, leaving behind some of the major sectors including aviation, metals and consumer durables. The growths in the retail and manufacturing industry, commodity markets and development of SEZs have been key factors in the growth of Indian logistics industry. Recent studies have indicated that the logistics industry is expected to grow annually at the rate of 15 to 20 per cent. A number of infrastructural projects involving warehouse and logistics parks are being undertaken are expected to be operational in the next 2-3 years.
The setting up Special Economic Zones (SEZs) has led to increased logistics activities around them. Several logistics parks have come up at locations like Mumbai, Kolkata, Chennai and Hyderabad because of their excellent port, rail and road connectivity and are witnessing significant investment in infrastructure. Many of the large logistics players are in the process of setting up warehouses, container freight stations (CFS), inland container depots (ICD), logistics parks, distribution centers and other facilities to leverage the abundant opportunities. Increase in foreign trade is expected to further accelerate the demand for logistics services.
The future of the industry is very bright and is sure to witness exponential growth in the coming years. The increased participation of both public and private sector is crucial for developing logistics and improving supply chain management. Not only do the logistics companies need to create efficient business to thrive in the logistics sector, but they also need to explore ways for investing energy, costs and time to grow a strong logistics system.
Upcoming 5 tech trends that will transform the Indian logistics industry in 2022
- Artificial Intelligence and Augmented Intelligence:
- Adoption of Cloud-Based Systems
After AI, the next logistical and natural adoption will be the use of cloud-based systems. With the help of this technology, companies would be able to invest less in hardware maintenance, but more in improving security through data encryption, hence increasing reliability, and reducing costs.
Cloud solutions will not only help mid-large enterprises but also smaller firms by allowing them to opt for pay-per-use options and reduce their expenses. They can further add more features or can use tools that can help them keep a track of progress and organise future projects.
- Data Analytics
The amount of data generated around the world is huge and studying this data to understand your customer is another way to deliver better services. Another trend that we expect to drive the logistics industry is to use data analytics and to learn about their customer buying habits and competitive strategies. A shift to data-driven reports will make fuel management, warehouse management, and other processes easier.
- Use of Autonomous Vehicles and drone delivery:
So far, we have only witnessed drones being used for surveillance, agriculture, and military purposes. However, the pandemic has expanded the horizon of drones and has introduced many innovative uses such as public surveillance during the lockdown. While India is all set to enter this rapidly expanding market, with the Ministry of Civil Aviation expressing its interest to make India the Drone Hub of the world, more research is needed to understand the challenges that one might face while using drones for delivering goods from one place to another
Further, to reduce the cost and increase efficiency, many of the growing logistics firms have started investing money in developing autonomous delivery vehicles. Though the use of autonomous delivery vehicles is still a distant dream, experts believe that once achieved, the innovation can help companies save up to 60 percent of their delivery costs.
- Last-Mile Delivery
Be it traveling or shopping, ‘last-mile’ is the buzzword for both the mobility industry as well the online shopping industry. With the change in the shopping behaviour of the customers and a growing interest in online shopping, companies are now focusing on smoothing the last leg of delivering goods. To provide customers with a more personalised experience and reduce costs, they are ensuring that the delivery of goods from the warehouse to the end customer is convenient and hassle-free.
While the industry is expected to grow faster than ever, the adoption of these technologies and adding more flexibility can help companies meet the changing requirements of the customers and further double fold the growth.
For those who believe that ‘with challenges comes an opportunity to innovate and think out of the box’, they should also believe in the fact that ‘the one who is future-ready can survive the unpredicted and extraordinary rugged road ahead’. And these technologies can make our journey towards success far more interesting and hassle-free.
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