Logistics is a key element of business operations and among the vital pillars of any nation’s economy. Over the past decade, its evolution has been shaped and accelerated, to a great extent, by the rise of e-commerce and online business models. To keep pace with these changes, logistics companies have been transforming their traditional modes of operation to ones that are enabled by technology. It was amidst this period of transformation that the COVID-19 pandemic struck, upending the functioning of all industries and leading to labour shortages, cargo capacity challenges, manufacturing slowdown, order delays, and demand and supply shocks. However, there are some positives that emerged even amidst the disruption, and the transformation journey for logistics companies now factors some of the realizations and changes that the pandemic yielded.
The immediate and the continuing impact of the pandemic on logistics players
The lockdown was the most difficult period of the pandemic from a business perspective. Consumer spends dropped dramatically. The demand for transportation dropped concurrently and was limited only to “essential” items and services. Logistics companies couldn’t afford to operate normally; consequently, as loads decreased, costs increased.
Meanwhile, the migration of workers to their hometowns caused an acute shortage of labour, which, in turn, increased the costs for logistics companies as they sought alternative resources. The demand of workers for steady wages and benefits added to the worries of logistics providers, as did the expectations from customers to bring down costs as the latter continued to bear heavy overheads amidst a period of near-zero revenues.
Even as the lockdown eased and revival of consumption began, social distancing, sanitization and hygiene continued to remain the top priority for businesses and consumers alike – and will presumably continue to be so, well into the future. Ensuring that all the requirements in this direction are met involves an additional cost for logistics players.
Enhancing or transforming logistics operations to address customer and business needs
Ecommerce came to the fore as the preferred mode of shopping for many during the pandemic, and it continues to gain in popularity as consumers seek the convenience and safety of having their purchases delivered to their doorstep. Not only are the ecommerce shipment volumes growing, but the profile of the goods being shipped is changing too. An increasing number of consumers are ordering large, high-value products online, and logistics companies are having to make adjustments, accordingly, to their operations and facilities.
Moreover, logistics providers are now prioritizing safety and hygiene for all their employees, partners, and stakeholders, right from warehouse workers to the consumers, and everyone in between. Deliveries have become safer and, wherever possible, contactless. Drones can serve this purpose very well too, but their use depends to a great degree on the law of the land. The number of touchpoints for a product through the entire supply chain is being minimized. As we move forward, all systems and processes that can be automated, should be. The use of e-dockets and e-billing should be encouraged by both logistics players as well as their customers in the interest of reducing contact and improving record-keeping.
Logistics companies are also, in a bid to maintain and sharpen their competitive in a digital world, are transforming their traditional setups into IT-and-technology-integrated operations to improve efficiencies, reduce costs, and deliver greater customer satisfaction. Towards, this end, the “soft” infrastructure, which includes such as training and policy framework, has become as important as the physical and digital infrastructure.
Opportunities for better growth and efficiencies in the industry
The restrictions imposed on movement during the lockdown, and the difficulties that they posed, were eye-openers for the industry. As a measure to try and ensure uninterrupted operations with fewer hindrances should such situations arise again in future, logistics companies should consider moving their supply chains closer to the customer. Instead of investing in a few, large warehouses, it might be a better idea to have more, smaller warehouses and storage facilities that are closer to the key markets and can quickly supply goods. This idea is already gathering momentum, and with e-commerce driving logistics growth since the pandemic began, there is growing demand for temporary warehouses. Logistics players are evaluating retail spaces, and even banquet and marriage halls, for alternative use as warehouses.
Logistics providers are always under pressure to improve delivery density and cost efficiency. This can be achieved, to a considerable extent, by optimizing their operations. The last mile can often account for up to a third of the product cost; hence, optimizing it is essential. Other aspects of logistics – right from planning to execution – should be reconsidered, repurposed and digitized. Many companies employ dashboards today, which provide a complete single-window view of, as well as insights into, production and shipment. Such technologies will become the norm in coming years. The efficiency, timeliness, responsiveness, monitoring and security of on-ground operations can be improved significantly with solutions that employ GPS, biometrics, sensors, and “smart” technologies.
Sustainability is not an option today; it is a necessity for every business. Logistics providers, like all other businesses, will need to consciously work towards lowering their ecological footprint while, at the same time, boosting financial growth, environment care, and the health of society. Fuel-efficient and environmental-friendly vehicles such as electric vehicles and hybrid cars could be one part of the solution. Some of the leading logistics companies, meanwhile, have started using connected technologies to collect and share data in real time to help their fleet drivers reduce fuel consumption and drive safely. There is also software available for calculating the carbon footprint of the fleet, which makes it easier to make decisions while planning routes and loads to make them more efficient and sustainable.
The Government of India, on its part, recognizes the importance of logistics, and has made many decisions over the years, aimed at transforming the sector. Recent among them is the idea of developing multi-modal logistic parks across the country. These parks will improve the country’s logistics sector by lowering freight and warehousing costs and reducing vehicular pollution and congestion. India is expected to have its first such park by the year 2023, in Assam.
India’s logistics sector is shaking off the negatives of the year gone by but taking the positives as it works towards becoming more robust, efficient, and profitable from a business perspective, and safe and friendly for the people and the environment.
This article has been authored by Venkat Reddy, Business Head – Warehousing, Chowgule Brothers Private Limited.