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Logistics Outlook 2022: For better or worse

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Logistics Insider reached out to the industry experts and managed to get you the answers to some of the most crucial questions that are plaguing the industry – Is the difficult ride over? What trends are expected in 2022? How will the industry perceive sustainability? And what tech innovation will be seen in different segments? Read on to know more.

The logistics industry is one of the most critical industries in any economy. However, it is only in recent times that India has started to realize the importance of logistics and its impact on a nation’s competitiveness in the global market.

The Indian logistics sector has been plagued with inefficiencies for many years, which has led to the logistics costs (~14% of GDP) being higher than several other nations (average 8-10%).

But the sector is in the throes of a transformation. The development of support infrastructure that improves connectivity, changes in the perception of logistics from being just about transportation and warehousing to a specialized function, evolving consumer demands, the rise of e-commerce, and the emergence of tech-driven operators in this space is helping the segment to thrive.

The logistics industry usually handles many products – including food, clothing, medical supplies, and more is pegged at ~USD 250 bn – and is expected to portray a growth of 10-12% CAGR, to USD 380 bn by FY25.

Considering this promising growth of the industry it is only fair that we peek into every segment of the industry and take a recap of the bygone year while also taking a look at its 2022 outlook.

Surface

Surface logistics which was used to transport 60% of domestic goods in 2021 has shown exceptional performance. ICRA, earlier in March, pegged the domestic road transport segment to showcase a growth of up to 12% in FY22 led by rural positivity and pickup in sectors like e-commerce,  automotive, and pharmaceutical – which has been faster than expected.

“In 2020, the sector showed a solid performance, as business closures were partially offset by e-commerce sales. National online sales increased from 22% in 2019 to 33% in 2020. The value-added of the sector is expected to increase more than 2% in 2021. The report observes that with rising income levels, higher exports, a rapidly growing e-commerce sector, a growing retail sales market, and a projected GDP growth of seven to 8% in the next five years, the demand for goods movement is also expected to increase at 8% CAGR,” Aditya Shah, Executive Director, V-Xpress explains.

Harshal Bhoi, Chief Business Officer, Xpressbees says, “As far as 2022 is concerned we might see some developmental work on drone deliveries, personalization technology, Chatbot (AI)  Interventions, and advances in emerging technologies to emerge and take precedence.”

“In the year ahead, we believe that there will be increased adoption of multimodal transportation systems in fulfilment logistics and warehousing services. We have also observed an increase in Omni-channel distribution models especially in the e-commerce and consumer segment, a higher level of service integration and demands for integrated solutions and greater adoption of technology in creating the customer value proposition. We also see growth in e-commerce and Omni-channel retailing and this trend is further leading to a shift to ‘direct to consumer’ fulfilment and distribution necessitating smaller size shipments coupled with faster cycle times. Our Electric Vehicles under ‘EDeL’ will continue to be our preferred delivery mode in last-mile transportation,” says Sushil Rathi, Chief Operating Officer – MLL Transportation & Procurement & Chief Executive Officer – Lords Freight Limited

Air Cargo

The air cargo industry in 2021 has been on a bright spot. According to credit rating agency CRISIL, in India, while passenger traffic demand for the financial year (FY) 2020-21 was 34% of a pre-covid level, cargo demand was at 74%.

The rising demand for freight was on account of disrupted global supply chains, necessitating quick transport by air and due to an extraordinary rise in e-commerce demand.

“The air freight forwarding market grew by 26% during the first six months of 2021 than sea freight which grew by 10.3%. We will be witnessing a definite upsurge in the air cargo segment in 2022,” said Ashish Asaf, Managing Director, S.A Consultants & Forwarders Pvt. Ltd.

“The pandemic has brought IT to the forefront as a critical enabler of business continuity and transformation. Celebi will continue to push the boundaries of technology initiatives with accelerated digitization as the standard while leveraging intelligent technologies like Blockchain, AI, and IOT as the blueprint for survival and eventual leadership in this space,” Kamesh Peri, CEO, Çelebi Delhi Cargo said.

“India has a strong potential in the air cargo segment, owing to a fast-growing economy and unsatisfied demand, further accentuated with the advent and distribution of vaccines. We have operated close to 8,000 cargo-in-cabin charter flights to 71 cities in India during the pandemic. We have already announced the leasing of four A321ceo freighter aircraft, which is scheduled to arrive on time during the first half of 2022,” informed William Boulter, CCO, Indigo.

“If the Government & the DGCA takes all the steps towards handling Omicron variant smartly and strongly keeping the Aviation Sector’s growth and its revenue projection on the forthcoming Union Financial Budget 2022, we will surely come out of this and can see some reasonable growth in 2022, especially Air Cargo in India – which is really on high demand always,” V. Chandra Kumar, Chairman – Managing Director, Active Freight Logistics said.

With constant enhancements in the air cargo business model, technologies and workforce skill set we can expect the future of the air cargo segment to be safe & secure, green, automated, connected, and smart.

Railways

In the past year, the Indian Railways has set an ambitious goal to increase the contribution of rail in the transportation of domestic cargo and garner a greater share in multi-modal/domestic freight transportation.

4th largest rail freight carrier in the world, the Indian Railways aims to aspire 1.5% of the Country’s GDP by building infrastructure to support about 45% of the modal freight share of the economy.

And to accomplish the goal, several steps were taken by the railways.

• Fast-tracking two Dedicated Freight Corridors (DFC), one on the Western route (Jawaharlal Nehru Port to Dadri) and another on the Eastern route (Ludhiana to Dankuni).
• Increased the average speed of freight trains to 45.6 kmph in March 2021, marking an 83% increase over the previous year
• Completion of railway electrification works on a total of 6,015 Route km during 2020-21
• Setting up of the highest ever planned capital expenditure of $29.5 bn in 2021-22
• Launch of Freight Business Development Portal, a one-stop cargo solution for seamless
goods transportation

These steps allowed the railways to clock a freight revenue worth $16 bn in 2021, a 3% increase in freight revenue. Along with this, the railways also market growth of 1.93% in quantum of goods loaded.

Now wrapping the previous year, the railways tie high expectations from the coming year on the back of rising freight traffic due to increasing urbanization, rising incomes (both rural and urban), growing industrialization across the country along with private sector participation, operationalization of the Six high-capacity, highspeed dedicated freight corridors, development of Diamond Quadrilateral network of highspeed rail i.e., connecting major metros and growth centres of the country, grant of Special economic and comprehensive package of INR 20 lakh crores towards promoting manufacturing in India and the infrastructure plans such as the National Infrastructural Pipeline and PM Gati Shakti (National Master Plan for Multi-modal Connectivity).

This is an abridged version of the cover story which was originally published in the January issue of the Logistics Insider Magazine. To read the complete article, click here.


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