How are Cost and Value Imperative to Logistics Sector
The sector is considered as multi-dimensional and value-added activity, including production, time and control of elements of the supply chain
Demand is a problem in many of the developed countries, but managing those demands has been the biggest challenge in India. And so, the logistic sector is helping in managing the demand of supply chain, where it manages the flow of things from the initial stage to the final stage of consumption, in order to meet the requirement of the corporations.
This includes the physical items such as food, materials, animals, equipment, and liquids even the abstract items such as time and information to operate.
Role of Logistics Sector
The purpose of the logistics sector is to make available goods, raw materials and commodities, fulfilling four major requirements related to order, delivery, quality and cost fulfilment.
And thus logistics sector is considered as multidimensional, value added activity, including production, location, time and control of elements of the supply chain.
How is Smooth Transportation Facility Important
Transportation is a crucial juncture, which acts as the nervous system of the economy in India. In the current scenario, logistics is generating less revenue in India as compared to other developed countries. Problems faced by the Indian logistics industry are:
oDilapidated conditions of roads in the country
o The middlemen trouble (the involvement of middlemen increasing the overall operational cost) while moving from one state to another
oLack of GPS trackers in vehicle reducing the transparency for customers and the drivers
- Cost associated with transportation remaining constant, including the amount paid as bribery in different states
- Being the crucial part in the manipulation of logistics, transportation involves moving load, delivery speed, service quality, operation costs, the usage of facilities and energy saving
- Increasing cost of petrol or other fuel creating a major impact on the cost of certain products, which result in significant changes in supply chain
But in the same line, it is important to understand the growth aspects in the logistics industry o The increase in investment from both public and private sector y-o-y
o When India becomes the manufacturing hub
o Infiltration of e-commerce giants into the hyper-local delivery segment and express
Impact of GST on Logistics sector
In India transportation alone holds 60% share of logistics industry and rest 40% is contributed by warehousing, value-added logistics, etc. Being the backbone of manufacturing and trading activities in the economy, logistics has an important role to play, where the expenditure is rising and demand is always high.
The major alteration under the GST system is that GST involves one effective duty of tax on a business as compared to the multiple levies of tax. GST is a dual tax levied by both Central and state government on the supply of goods and services.
Many, who think GST has increased the cost of every item today, should know that the recent GST has brought down the cost of logistics sector by 5-10%. For the first time, the logistics sector has got the right platform, where they are appreciated and supported for the cost conscious market.
Well GST does bring double positive impact in the logistics sector in India.
Transportation mainly works on road and time spent at inter-state check posts due to a difference in taxes between states accounts to idle time has been eliminated in GST regime. Hence, transport time would reduce by 10-15% % and the cost of transportation will be by 5-10% % which will reduce the costs for customers and logistics companies, making it more efficient and profitable.
In simple terms, one can say this as "cost reduction and value creation".
The author is Co-founder of GoBOLT, one of the tech-logistics companies based out of New Delhi.