Indian businesses for long have ignored the significance of the logistics sector that continues to remain one of the most under invested sectors in the country. While logistics undertakes the critical role of connecting the production centers with consumption markets, inefficiencies in managing it could lead to severe disruption in the entire supply chain network.
In India, the experience with regards to this sector has not been very encouraging in the past. Therefore leading to colossal losses during the process of transportation, distribution and storage of goods, which forms the major part of the logistics in India.
In order to attract fresh investments, an in-depth study is needed on the various intricacies of this sector with special emphasis on the demand, feasibility and investor’s returns aspects.
The logistics sector in India can be broadly be classified into three country areas-
- Distribution and
While in India, the transportation and distribution sectors have traditionally been a part of many studies with numerous reports and findings affiliated with the sectors, it is the storage and warehousing sectors that have mainly remained under-researched.
Although the warehousing segment constitutes only 15%-35% of the total logistics costs, its importance cannot be ignored with respect to the role it plays in the smooth functioning of a supply chain network. As per a recent article by Knight Frank, warehousing in 8 major Indian cities is likely to grow at 19% CAGR till FY2026, inspite of recent dip in demand during 2021 due to Pandemic. Maximum demand during this period is expected from E-Commerce sector, against the traditional main occupier, i.e the manufacturing sector. 3PL and other sectors will be the other major occupiers of the main demand.
By 2026, the total committed land for warehousing development is appx. 22.500 acres in top 8 cities of India, including Mumbai, at the first place, followed by Chennai, Bengaluru, Pune, Ahmedabad, Delhi NCR and other tier I cities.
The e-commerce sector at present globally is the major demand driver of logistics as a whole, warehousing in particular. In India e-commerce is still in this infancy. But entry of the new giant businesses, indicates, the e-commerce sector is at the cusp of the next phase of demand growth in the sector. As per the latest India, warehousing report – 2021 by Knight Frank India, demand form secondary market i.e. from the tier II and Tier III cities, is growing even faster than the primary markets. Among the secondary market, Indore and Jaipur have shown the maximum demand coming.
Recent Logistics Scenario in India
The recent Indian logistics sector comprises inbound and outbound segments of the manufacturing and services supply chains. Of late, the logistics infrastructure has gained the much needed boost from business houses as well as policy makers. Managing the infrastructure to effectively compete with other industries was earlier not given its due emphasis. Inadequate logistics infrastructure created bottlenecks in the growth of an economy. The logistics management regimen has the capability to overcome the disadvantages while providing cutting-edge competitiveness in the long run. There exist several challenges and opportunities for the sector in the Indian economy.
The biggest challenges faced by Logistics sector in India are
- Poor integration of transport networks, information technology and warehouse & distribution facilities
- Different regulations and guidelines in different parts of the country
- Untrained manpower
- Mostly unorganized sector, majority of small truckers having an average fleet of 20 trucks
- Lack of professional training institutions
- Poor client services
- Poor facilities and logistics management
- Absence of specialist equipment, like proper refrigerators, goods handling equipments, ERP systems
- Lack of research and studies of the sector
Following immediate attention to the following can drastically change the logistics scenario in India
- Emphasis and investments in building world-class road networks, integrated rail corridors, modern cargo facilities at airports
- New govt. policy initiatives like –
- Logistics parks should be set up and accorded status equivalent to Special Economic Zones
- Allowing open arm and welcoming entry of foreign training and research institutions in the area of logistics and supply chain management
- Encouraging foreign investment in the logistics infrastructure, modern processes and technology
- New modern storage infrastructure development including for perishable products
- More land committed to warehousing and logistics facilities in primary as well as secondary markets
- R & D in both imported and indigenous technologies for implementation of automated distribution, transportation and storage
- Early adoption of new technologies like Blockchain, AI and Smart Supply Chains to improve efficiencies.
- Use of technologies to comply with environment protection global guidelines and protocols
- Foreign the domestic investments in new technologies and green logistics.
- Development of reverse logistics including disposal of environment unfriendly products.