Business

Factors Influencing the Paradigm Shift in the Logistics Sector in India

This column is authored by Sumit Sharma, Co-founder of GoBOLT

Logistics sector indiaLogistics is the back-bone of any economy as it affects all end user industries in general and is very important for all three sectors of the economy: agriculture, manufacturing and the service industry. The logistics market amounts to 13% of GDP and is estimated to be at US$ 4 Trillion worldwide. The current logistics market in India is about $250bn. The Indian market is nascent, meaning there are only a handful of large organized players across various segments of logistics. In a $250 bn industry, we don’t have even a single player with more than $2bn revenues whereas we should have atleast 10-15 players with revenues in excess of $5 bn each! This is turn means start-ups are likely to have less resistance from large established traditional players to deal with and have huge headroom for growth from existing market itself.

In developing countries like India, the development in logistics is quite different from other countries. Technological innovations and advancements are currently the governing mechanism for selecting supply chain partners, coordinating and monitoring the end to end process delivery. Technology has brought several innovations into logistics. There are several recent technologies such as the internet of things, mobile, augmented realty, social media, cloud storage, big data analytics and computing which improve the efficiency of the logistics operations.

All the relevant changes in technology are being fast adopted by new generation tech logistics companies which have helped in transforming these organizations through electronic means like collecting, moving, storing, and analyzing data, information and knowledge. It also helped to develop competitive edge with greater ability to deliver customer-configured products and value added services faster than competition.

In India, most of the startup action has been in the long-haul freight segment with startups aiming to enable faster transactions, better truck utilization, providing supply chain visibility to both customers and vendors, efficient spot pricing, standardized service levels and agent dis-intermediation.

Ever-increasing internet and mobile penetration in India has meant that businesses can continuously leverage technologies to capture new demand and supply and build a highly scalable network. Startups are also deploying innovations like sensor technology but there is a need for a focused plan for skill development in the wider Indian logistics landscape. At the firm level, companies are focusing on moving towards reducing cycle times in order to add value to their customers.

Popular Read:  Mobile Apps vs Mobile Web - What to Choose for the Best UX

More than 75% of the trucking industry is unorganized and saddled with inefficiencies like lack of visibility of return load, mutli-level intermediaries, & low quality of information flow leading to truck running less than 5000 billable km/month (apart from this non-billable or dry-run where truck moves from point A to B without cargo) and having only 14-15 days of actual run in a month while waiting for cargo on other days. This can change and is changing with tech-enabled logistics – visibility of return load, incentive structure for drivers and quality systems to root-out inefficiencies is already bearing fruits and trucks having billable kms in excess of 10,000 km/ month.

Fusing Technology with Logistics

The addressable market for a tech logistic company is of US$40 bn. India needs more than 10 companies to scale upto more than USD 1 billion in revenues in this space (inter-city full truck load) to make Indian Logistics Industry efficient. Tech logistic startups like GoBOLT have given emphasis on the following elements to deliver value to its clients and other stakeholders:

  • Unique hybrid operating model: It operates through an innovative model involving combination of owned, dedicated and marketplace fleet for control over operation, balanced capital deployment & risk management.
  • Scalable technology platform: The company has developed a versatile technology platform, “Launchpad”, to deliver scalability, efficiency and robustness. Aids in automated vehicle selection, improving asset utilization, route optimization, fuel cost saving among others.
  • Focus on operational efficiencies: Strong operational involvement & tech-enablement leads to faster TAT, higher asset utilization and increasing share of wallet.
  • Ability to grow profitably: Business model aimed at reducing cost per km and achieve higher operating leverage; currently profitable for most customer engagements.
  • Strong professional management team:  Tech-savvy management team adapting to changing needs of the industry; experience of leadership roles in large MNC’s.

Industry tailwinds

Implementation of GST to push organized logistics industry and also improve cost structure for the industry; eCommerce continues to drive need for high industry growth. Due to these advancements, PE investments have been seen in this sector. Recently, Warburg’s investment in Rivigo; Carlyle & Fosun’s investment in Delhivery, etc. are clear examples of the growth of foreign capital recognizing the need and potential of this particular sector in India. It is expected that in 18 months or so, these companies may start getting endorsed by large public market investors also once they  get on to IPO bandwagon.  It is of interest to note that many traditional logistics players took decades to reach a turnover of over Rs. 800 crores, which some of these start-ups have achieved in 3-5 years time. Industry experts suggest that some of these may scale upto Rs. 6000 crore+ in next 2-3 years.

Popular Read:  How to Manage a Group of Female Employees

Presently, the visible changes the new generation tech logistics companies are bringing in this sector are:

Monitoring the vehicles & every process

With the help of technology monitoring of vehicles can be done accurately. One can send the proper updates to customers alongside estimated time of reaching the destination.

Ensuring Timely delivery

In India, online retailing is making a big wave with the presence of  e-commerce companies. E-commerce giants like Flipkart, Amazon, EBay, Shopclues, Myntra, Homeshop18, etc. are doing very well by hiring third party professionally managed logistics companies to ensure their customers with timely delivery.  This is beneficial for both the companies, because the companies are strengthening their goodwill and logistics companies are spreading their market segment simultaneously.

Drivers’ ecosystem getting changed

Life of truck drivers are getting better because there is a fixed rotational shift allocated to each and every driver. Now, the drivers are having proper logo uniforms of their company and having GPS tracker in their vehicles with whom they are reaching to their destination without any problems. Also, trucks are not heavily loaded because of proper segmentation. Hubs have been created to provide them proper shelter, food and place to rest after a driving span of 8 hours. Another driver will continue the journey and so on. But everyone has to maintain a uniform time for covering a particular distance, so that the goods reach to the destination in time. The company will monitor the same simultaneously. Trucks are well maintained and have modern facilities which enable the drivers to avoid exhaustion and pilferage or spoiling of the goods to be delivered.


Have ideas to share? Submit a post

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>