Low penetration of automation and processes in the largely unorganised sector is a setback for logistics in India. Efficiencies through better infrastructure and statutory conditions would help unshackle the sector’s economic potential significantly, writes Thomas Tieber.
Although the Indian logistics industry has evolved over the years, there are a host of challenges which the industry continues to grapple with. These include central and state taxes (GST), local levies (octroi still exists!), licences, excess paperwork and red tape, lack of adequate infrastructure and shortage of trained logistics personnel. If India has to reach its potential of becoming a global economic superpower, it realises the need to make heavy investments in infrastructure development which will increase logistics efficiencies.
Some of the factors that have worked in favour of the industry are:
Globalisation: Global logistics players have been looking at India as the destination of the future. Major global brands like Walmart, Apple, HP, Levi’s, Bosch etc, source from global markets and have specific protocols when it comes to supply chain management (SCM) and logistics management for the products they source. In the last few years, India has emerged as a major sourcing and manufacturing hub for global players in industries such as life sciences, automotive, IT and retail.
Infrastructure: Logistics is predominantly dependent on infrastructure. North America and Europe have the most sophisticated infrastructure, facilitating advanced SCM: The Rotterdam Port is a logistics wonder and a standard for any country to match up to as far as port management is concerned. The same can be said for ports, airports and warehouses across Europe and also Asia. Good infrastructure ensures better cost optimisation and acts as an enabler for improved operational efficiencies. There is a need to bring the logistics cost down to a global level of around 4-5 per cent. These high costs are due to unwanted inefficiencies that creep in because of delays at clearance points, documentation, fuel costs, etc. There is no quick fix for these problems but it is encouraging to see that the government is keen to rectify the situation, albeit slowly.
Inviting foreign participation and expertise in infrastructure through joint ventures (JVs), build-own-operate-transfer (BOOT) mode and public-private partnership (PPP) to accelerate infrastructure development has yielded mixed results so far but needs to be persisted as it will help India leverage global expertise as well as sustain the image of a nation which fosters economic development through an inclusive approach.
Processes & automation: One of the major challenges for global brands to do business in India is its largely unorganised logistics industry which has low penetration of automation and technology. With the right technology in place, and the appropriate team to handle it, Indian companies will be able to reduce operational expenses, cut lead time, facilitate swift distribution of goods, reduce manual errors and retain satisfied customers. In the airfreight industry for example, e-freight is imperative in terms of the growing need towards cost and process efficiency, enhanced visibility and a paperless environment for international commerce. The ability to automate the exchange of cargo-related data for regulatory or commercial purposes makes implementation of e-freight a reality in future. Currently e-freight in India is in its infancy, and although a limited version is already present in the current environment, the benefit and result of it is yet to be realised at an optimum level.
Going forward, as more companies look forward to innovate and optimise their products and increasingly invest into logistics, they will require improved and enhanced technology and systems that will streamline their logistics management processes for better coordination. Multi-agent systems will play a larger role in handling specific technologies; and, as the world continues to expand and become an even larger global marketplace, companies will have to consider technologies that facilitate ease of communication.
The author is CEO—South Asia, DHL Global Forwarding.