A growing number of Last Mile and First Mile delivery startups are showing a bright ray of hope for the logistics industry in India.
Looking to create a value ecosystem, these startups are focusing on working with sellers in organised and unorganised sectors, becoming the link that improves their logistical cost efficiency simultaneously.
The first and last mile of product distribution are very crucial to any retailer. The first mile refers to the movement of products from a retailer to a courier service or to anyone who will take these goods to their final users; and the last mile refers to this final movement of products to their final users.
Both of these aspects involve many processes including storage, transportation, etc and can be addressed by an efficient logistics industry.
In India, logistics is not only growing but also has tremendous potential because of an ever-increasing demand. But, there’s a lot left undone.
Problems, problems everywhere
India’s logistics industry is the kind that works long hours during the day and has a hard time sleeping at night because it’s fretting about work. Despite of being a fast growing market, with a turnover of about $120 billion, logistics in the country has been riddled with inefficient traditional practices and an acute lack of innovation. Around $45 billion are lost annually due to these inefficiencies.
It is interesting to note that while we continue struggling to ensure the right infrastructure for logistics, courier companies in the West are themselves innovating to smoothen out their last mile.
In Germany, for example, DHL – a first mile courier service – set up ‘Packstations’ more than five years ago to allow customers to pick up their packets using a customer card. The idea was to get customers to pick up their own parcels & DHL would deposit their parcel at the nearest drop box and inform them via text or email; the consumer would then get their parcels from these Packstations using their customer cards.
The environment in India looks poised for change as budding entrepreneurs are now bringing a wave of technology with them. Currently, the sector’s biggest problem is that of capacity under utilization which ends up increasing the overall logistical cost. Imagine the cost of storing, packing and delivering your online purchase to, say, Flipkart and compare it to the cost of the same for your weekly fix of groceries to your local vendor.
The industry needs an environment that connects both their economies to decrease their logistical headache.
The Last Mile problem
The last mile often poses most problems for any retailer. For example, if at the time of delivery, the customer is not at home or is out of reach, it costs the company crucial time and money. It also exposes the goods to the risk of damage, theft, etc.
Further, with increasing internet penetration and a sharp rise in numbers of online buyers, such instances are only increasing.
Sometimes, there are other risks involved in the delivery process. Amazon and Flipkart, for example, have declined customers from Uttar Pradesh in the past because of consumer malpractice.
In logistical terms, this final struggle to get the product to its customer is known as the “last mile problem.” Transport makes up for a huge chunk of the last mile problem. 75% of commercial vehicles in this sector in India are owned by small fleet operators. Furthermore, there is an acute lack of proper road and rail infrastructure. And to top it all, most of these fall in the unorganised sector.
Research shows that just about 1% logistics players in India fall in the organised sector. The resultant dominance of the unorganised sector exposes the entire industry to a vicious cycle of inefficient utilisation of resources, corruption and suboptimal services.
The unorganised sector also brings with it wage labourers who play a very important role in the last mile. They could be your delivery men, tempo services, etc and even they are plagued with problems like incompetent wages and lack of infrastructure.
Upcoming first and last mile startups are attempting to create an ecosystem where better economies of the organised sector help improve the wages and available resources of the unorganised sector. At the same time, they are benefiting the organised sector by taking away the headache of that last mile.
Huge market, plenty services
Studies show that e-retail is set to see a 72% jump in average annual spend by Indian online consumers in 2016. The right ecosystems stand to benefit SMEs, large retailers and even vegetable vendors and small restaurants.
At 13% of the GDP, India’s logistics spend is already one of the highest in the world – second only to China.
A host of government initiatives like ‘Make In India’ and the implementation of goods and services tax is expected to bring an influx of money in the industry. Better financials can go a long a way in improving the efficiency of logistics with better warehouses, fleets and allied services.
Another positive is the improvement in the country’s GDP and an increased focus on improving roads and rail freight corridors.
Considering the extent of growth opportunities and such administrative initiatives, budding startups are on the precipice of completely changing the face on India’s logistics with just the right mix of technology and managerial skills.
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