The lockdown due to pandemic initiated a phenomenal amount of migration from urban India to rural India specially from metro cities. Millions of unskilled and skilled workers are headed back to their hometown since the lockdown was announced. As per CMIE (Center for Monitoring the Indian Economy) about 122 million people have to leave their job due to pandemic. State governments are making efforts to facilitate the movement of this blue-collar workforce. Most of these blue-collar workers work on a contractual job or in the SME sector.
The Indian logistics industry is highly fragmented and unorganized. Organized sector has made continuous efforts to gain more and more share in this market. In segments like Rail transportation, Air transportation and waterways, the organized sector has a dominating presence. But in road transportation, which contributes more than 62% of the overall transportation, the share of the organized sector is approximately 10% of the total market. Even on the warehousing front, a large market share is controlled by small and medium-sized players.
The logistics industry is a large employment generator. According to 2017 data sector provided employment to more than 22 million individuals. With the emergence of e-commerce logistics, employment in the sector has grown significantly in the past few years and was expected to cross 32 million mark by 2022 with a CAGR of approx. 8%. In this sector, a major portion of its workforce engaged directly or indirectly is blue-collared. Reason for the high number of blue-collar workforces in logistics is the nature of transactions, lower level of automation, low investment in infrastructure and fragmented industry.
The logistics blue-collared workforce includes skilled, semi-skilled and unskilled workers. Migration has most impacted the unskilled segment of the blue-collar workforce, but the semiskilled and skilled segment also got impacted. As of now, the availability of unskilled labour has become a challenge due to the high degree of migration. Unskilled labour availability has a direct impact on the loading and unloading of vehicles. Such shortage has not only pushed effective labour cost towards the north, but also created stagnation in the chain. Currently, we are at a level of approximately 50% load factor. The situation will be graver when supply chain volume reaches to pre-COVID days.
Poor availability of last-mile delivery partner will be a barrier in the growth of e-commerce. These delivery partners are semi-skilled workforce engaged in delivery-pickup activities including combining items from orders, scanning consignments and ensuring positive customer feedback. Once a delivery partner moves away, It not only impacts performance in the immediate term, but it also put pressure on engaging and training new personnel, especially when e-commerce is growing at a much faster pace, in spite of the crisis. As per one estimate, the logistics sector will require at least 3 million people by 2022 for the last mile.
Another major impact of migration will be on the availability of drivers. The industry was already struggling with a mismatch of drivers’ demand and supply. Driving of commercial vehicle is a skilled job, and migration will have serious consequences as gap can’t be filled on short notice. Even delay of the return of drivers by a few months will disrupt the continuity of supplies. Already the cost of vehicle hiring has gone up due to unavailability of drivers.
In the case of other semi-skilled or skilled workforce of logistics sector like floor supervisors, loading
supervisors, packers, crane/reach truck operator etc, absence of the workforce might not stop the work completely but can impact productivity significantly. As a consequence, there may be business opportunity loss or higher service failure in services.
This migrating workforce is not expected to return to their workplace in a few days or months, as most of them have moved back to their native place after two months of lockdown. The migration of the blue-collar workforce will have very severe consequences immediately post COVID recovery. Already many logistics companies have terminated
their contractual blue-collar workforce, which seems to be the right strategy to trim costs at the time of crisis. But in mid to long run, it may be a costly strategy for these organizations.
This article has been authored by Vikash Khatri, Founder, Aviral Consulting Pvt Ltd. All views expressed in the article are of the author’s.