Why Businesses Need to Scale Their Logistics Operations While there are several reasons to scale up logistics, the sheer size of the market alone necessitates businesses to expand their logistics operations
By Neeraj Bansal •
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Logistical considerations have always played a strategic role in business operations. They go beyond inventory management and transportation to include one of the most critical factors in success—location vis-à-vis markets or sources of supply. In recent years, changes in the business environment have forced companies, irrespective of their size, to pay close attention to how this function in correlates with others.
Commanding 13 per cent of India's GDP, logistics is fast emerging as one of the most powerful drivers of Digital India. In the near future, digital and offline retail will no longer be distinctive or competing silos; the mass market is coming to be dominated by a hybrid of the two. With omnichannel, the purchase journey is seamless across channels, giving buyers the best of both worlds: the freedom to shop around the clock with informed price comparison decisions, and the ability to touch, feel, and try out products at a store. Add to this India's billion-strong potential marketplace, and the sales volume trajectory can only go up. In numbers, omnichannel retail is estimated to reach INR 1,718 billion by 2019.
While there are several reasons to scale up logistics, the sheer size of the market alone necessitates businesses to expand their logistics operations.
Scale to Survive
In this market scenario, scaling logistics is desirable. It is also essential for market survival in a hyper-competitive marketplace where every venture – startup or otherwise – can have multiple imitators gunning for the same market. And in India's chequered startup history, which has witnessed many a venture die even after receiving tens of millions in funding, logistics issues in one form or another regularly find mention. Good logistics can resolve the many "hidden execution complexities' that surface when delivering to buyers from a geographically diverse audience, especially with offerings like product returns and rush deliveries that create a dynamic supply chain. Scaling not only entails offering and shipping out more products but also delivering fast enough while ensuring the delivered product reaches the end consumer in immaculate condition. Put succinctly, in the words of ancient Chinese military strategist Sun Tzu: "The line between disorder and order lies in logistics."
Logistics Defines Customer Experience
For a long time now, customer service has lost its role as just an intangible, good-to-have aspect of the business. Instead, it is the definitive make-or-break factor, especially for retail and e-commerce companies that often stock similar brand and product lineups. Customers must make a split-second decision on which platform or store to spend their money, and previous customer experience-based impressions skew their decision on where they buy. According to a 2017 McKinsey & Company report, customer service is increasingly being recognised as a competitive advantage, as it enables companies to differentiate themselves. Even for brick-and-mortar retail, logistics-led factors such as the availability and freshness of stock (in case of perishables) can decide whether the customer will pay them another visit.
Compete with Incumbents
India's battle-tested players, especially those in the online space, have developed logistical competencies through both incremental improvements and regular revamps. Delivering at volumes as high as 400,000 to 500,000 shipments on a given day, they benefit from both economies of scale and meticulously managed last-mile control. They also learn from foreign counterparts and competitors on how to incorporate their tech and process advantages. With such benchmarks, carving out a niche for startups or SMEs is a difficult task. While they may browse page after webpage of a relative newbie's product offerings, consumers will be hesitant to "try out something new' if the delivery terms are not to their liking. This challenge is heightened when delivering to remote locations, which have only recently arrived on India's logistics map. Defined logistical operations can help make a difference even to those starting out.
Improve the Bottom Line
In today's hypercompetitive business environment, the product alone is not enough – everyone can replicate and improve upon it. The razor-thin margins that define retail today, especially retail with an online flavour, need a powerful logistical edge for market performance. Scaling up logistics leads to profitability; good logistics can increase revenue, reduce overall transportation costs, and improve cost structures across the supply chain. Logistics that is adaptive to real-time constraints, constantly incorporating regulatory and infrastructural developments, will define profitability over time. In this context, the entire supply chain – starting from first mile logistics, processing and sorting, fulfilment, last-mile logistics, and returns – all must be optimised for costs and efficiency.
