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Indian Logistics Industry: Current Scenario And Future Outlook

Indian Logistics Industry: Current Scenario And Future Outlook
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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Logistics is regarded as the backbone of the economy as it ensures efficient and cost-effective flow of goods and other commercial sectors depend on it. Logistics industry in India is evolving rapidly. It is the interplay of infrastructure, technology and new types of service providers, which defines whether the logistics industry will be able to help its customers reduce their costs and provide effective services. Despite weak response, the logistics industry continues to witness growth owing to the progress in retail, e-commerce and manufacturing sectors. The Global Logistics sector was expected to grow 10 to 15 per cent in 2013-14. Logistics industry is expected to reach over $ 2 billion by 2019. Rise of e-commerce logistics and increased domestic consumption will pave the way for the industry to grow further in future. With the promise of steady growth and improvement, the service oriented logistics industry is ready to expand beyond the horizons in the latter half of this decade.

Recent Scenario

The recent Indian logistics sector comprises inbound and outbound segments of the manufacturing and services supply chains. Of late, the logistics infrastructure has gained the much needed boost from business houses as well as policy makers. Managing the infrastructure to effectively compete with other industries has not been given its due emphasis. Inadequate logistics infrastructure can create bottlenecks in the growth of an economy. The logistics management regimen has the capability to overcome the disadvantages while providing cutting-edge competitiveness in the long run. There exist several challenges and opportunities for the sector in the Indian economy.

Challenges Faced By The Recent Logistic Industry In India

 The biggest challenge faced by the industry today is poor integration of transport networks, information technology and warehouse & distribution facilities. Regulations existing at different tiers are imposed by national, regional and local authorities. However, the regulations differ from city to city, hindering the creation of national networks. Trained manpower is essential for the third party logistics sector and the manufacturing and retailing sectors. It is lacking at the IT, driving and warehouse as well as at the higher strategic level. The sector is in a disorganized state in India. The general perception of logistics being a manpower-driven industry and lack of adequate training institutions have created crisis of skilled management and client service personnel. Poor facilities and management are reasons behind high levels of loss, damage of stock, mainly in the perishable sector. The problem arises mainly because of the absence of specialist equipment, like proper refrigerators. Lack of quality training is another reason. Though practitioners and academicians are slowly becoming aware of the importance of logistics and supply chain, however, the field is still not adequately explored as far as research is concerned. It is essential to prioritize research and development so that the weaknesses in the industry can be taken care of and improved.

Solutions To Some Of The Challenges

Infrastructure is the backbone of every country’s growth and prosperity. The same is true for the logistics industry. Emphasis should be laid on building world-class road networks, integrated rail corridors, modern cargo facilities at airports. Logistics parks should be set up and accorded a status equivalent to Special Economic Zones. It is necessary to realize that the logistics industry can best be benefitted if companies establish training institutions to improve the service quality of the sector. Good storage and warehouse facilities are important for the growth of the industry. With increase in the transportation of perishable products, the logistics agencies need to give a lot of importance to enhancing the warehouse facilities. Emphasis on research and development is potent because it encourages the use of indigenous technology, which can make the industry cost-effective and can also bring about improvement in services.

Future Prospects

The logistics firms are moving from a traditional set-up to the integration of IT and technology to their operations to reduce the costs incurred and to meet the service demands. The growth of the Indian logistics sector depends much upon its soft infrastructure like education, training and policy framework as much as the hard infrastructure. To support India’s fast-paced economy growth logistics industry is very essential. It is estimated that the industry will continue to grow at a robust rate of 10-15 per cent annually.

The global economic outlook and that of India is expected to significantly improve as India Inc begins to tackle the economic downturn. With a new government many policies are expected to be implemented, which will give a fresh impetus to India’s growth engine, particularly in the corporate and small and medium enterprises (SME) sector, which in turn will expand demand for the logistics sector.

With the implementation of GST, companies, which currently have small warehouses in several cities, can just set up a few in specific regions, following the hub-and-spoke model for freight movement from the warehouses to the different manufacturing plants, wholesale outlets, retail outlets and various POS. The growth is backed by the boom in the e-commerce sector and expansionary policies of the FMCG firms.

 
Edition: April 2017

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