Why Indian logistics service providers must include digitalisation in their recipe for success

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The logistics sector is the lifeline of manufacturing or commerce in any country. In India, the sector has traditionally thrived so far on the market networking and manual interactions of the operators. Typically, the manufacturers and transporters work in a near captive scenario. For instance, in majority of the transactions, the manufacturer or trader either owns or personally knows the transporters. The same set of vehicle owners are preferred and transactional communication are done in person with telephonic communication being pivotal.

This sort of status quo in the market has been disrupted by the outbreak of COVID-19 pandemic. The rapid spread of the infection and the near sudden lockdown that it brought into picture caused tremendous chaos in the Indian logistics industry. Millions of trucks were stranded or halted at various places.

As per reports, nearly 95% of the trucks had gone off road during the lockdown and about 30% of them are yet to actively return on roads. The temporary shutdown of production led to a drop in availability of shipments for the transporters to carry. Hence, truckers have now been compelled to look for alternate ways of securing work. The conventional limited networking approach is no longer effective in generating adequate business for all. Hence, there is a need among the logistics community for greater tech infusion and creating awareness among the operators.

If we go back a few years and look at the changes ushered in by the implementation of GST, we will see that the tax reform was one of the major catalysts towards digitization of Indian logistics sector. Before GST came into effect, the sector was dominated by distrust and shippers as well as transporters were vary of interacting with unknown service providers. Hence, there was a great risk of suffering losses caused by unverified service providers and the prevalent corruption. Tax rules varied from one state to another, leaving a lot of grey area for the local police and tax authorities to leverage.

The implementation of GST changed things for the better. The tax structure became streamlined and a uniform pan-India change came into enforcement. This made it necessary for the transporters to get registered with the authorities and comply with GST rules. This itself was a great push in making trucking operations more organized, efficient and technology-driven.

Along with GST implementation, the widespread proliferation of high-speed internet and smartphone access across India took place almost simultaneously, and that made it possible for truckers to integrate technology into their operations. Today, you can find most of the transporters active on social media and chat platforms. The power of lead generation through social networking is becoming increasingly evident to the operators.  

The logistics and warehousing in India are still in the initial stage of development and has a long way to go before catching up with some other countries. In our country, the logistic costs accounts for about 13% to 14% of the country’s GDP whereas in the developed countries this cost is only about 9% to 10%. A major factor for this higher cost is high fragmentation and low technology adoptions in the market which leads to lack of proper utilization of the vehicle. Further, the growth of the ecommerce and manufacturing sectors has created an additional pressure on the transporters to perform.

However, integration of the Indian economy with the global economy and various multi-national companies setting up manufacturing facilities locally have helped in bringing the global best practices to the domestic market. This has resulted in a gradual shift from simply managing the transport network and godowns towards a more integrated supply chain management system.

By using smart tools and technology, the truckers are able to ensure that their vehicles spend more time on the road. The tech also helps in effective space utilization, streamlining documentation and reducing the overall operational costs for them. Bringing all these areas under technology’s purview will be instrumental in streamlining operations and better profitability for the Indian logistics services providers.

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