Revolutionizing Logistics in India: Top Trends Driving Business Operations in 2023
The logistics industry in India is benefitting from technological advancements, policy initiatives, and infrastructure capex in 2023. Logistics is integral to economic growth and any improvements in the country’s logistics ecosystem has business positive outcomes – ranging from operational efficiency to expanding supplier networks to boosting last-mile-reach to meet market demand. Further, applied tech innovation and data-driven insights can allow companies to optimize their supply chains, allocate resources more effectively, and deliver exceptional customer experiences.
India’s logistics industry has achieved remarkable progress, highlighted by the country’s rise of six spots in the World Bank’s Logistics Performance Index (LPI). This improvement is credited to various factors, such as technology innovation, data-driven decision-making, and policy initiatives aimed at facilitating world-class infrastructure.
Earlier in the year, the government increased the Union Budget allocation for capital investment by 33 percent, amounting to INR 10 trillion, for 2023-24. This development has been warmly welcomed by the logistics industry as it is expected to bolster India’s position in the global supply chain by prioritizing infrastructure development.
Improving logistics performance can be a crucial factor in a country’s economic growth, enabling businesses to enhance their trade competitiveness, reduce expenses, and increase supply chain efficiency. This not only boosts productivity and customer satisfaction but also attracts foreign investment by creating a favorable environment for companies to operate in.
By minimizing lead times, cutting transportation costs, and improving inventory management, logistics improvements help businesses optimize their operations and increase profits.
India climbs six spots on World Bank’s Logistics Performance Index
India has moved up six places to reach the 38th rank out of 139 countries on the Logistics Performance Index. The LPI index measures countries on six aspects of logistics performance, including infrastructure quality, customs efficiency, logistics services quality, international shipment arrangements, on-time delivery frequency, and shipment tracking.
Several factors have contributed to India’s improved LPI ranking, such as the implementation of the Goods and Services Tax (GST), investments in infrastructure, and the adoption of technology. The use of digital technologies, such as GPS and RFID, has enabled better tracking of goods, reducing theft and pilferage.
The improvement on the LPI index can be a game-changer for India’s economic growth trajectory by enhancing trade competitiveness, reducing trade expenses, and boosting supply chain efficiency.
The LPI report also highlights India’s significant climb of 17 places in its rankings since 2014 and how the country’s efforts in digitalization and modernization have surpassed the performance of advanced nations.
The report suggests that emerging economies can significantly reduce dwell time at ports and terminals by using advanced tracking and tracing solutions such as cargo tracking. End-to-end supply chain digitalization in developing countries can reduce port delays by up to 70 percent compared to developed countries, making it a crucial aspect of logistics optimization.
The report also notes the growing demand for eco-friendly logistics, with 75 percent of shippers seeking greener options when exporting to high-income countries. Christina Wiederer, senior economist at the World Bank Group’s macroeconomics, trade, and investment global practice, suggests that targeting delays at seaports, airports, and multimodal facilities can improve reliability and have a notable impact on reducing delays.
How the logistics industry can facilitate India becoming a US$26 trillion economy
India’s transportation and logistics industry is set to play a pivotal role in supporting the country’s ambitious growth aspirations. According to a recent EY report titled “India@100: realizing the potential of a US$26 trillion economy,” India is expected to reach a staggering US$26 trillion by FY 2048. As the nation gears up to achieve this milestone over the next 25 years, the transportation and logistics industry will be a key enabler.
Currently, India’s freight movement is heavily dependent on road transportation, accounting for 66 percent of cargo in ton-kilometers. Rail transportation follows closely behind, with a share of 31 percent, while shipping and air transportation contribute three percent and one percent, respectively. However, freight transportation is unevenly distributed across different modes.
Efforts are underway to correct this imbalance by establishing integrated infrastructure, adopting a multimodal approach, and pursuing sustainable development.
Government measures targeting India’s logistics and supply chain industries
The logistics and supply chain industries in India are currently experiencing a significant transformation, driven by several government initiatives aimed at boosting the sector. Notably, the implementation of the GST and the recognition of logistics as infrastructure status are two critical moves that have been instrumental in driving this change.
Additionally, other initiatives have been put in place to streamline the movement of goods and reduce turnaround times. We discuss some of these below.
- Dedicated freight corridors: To facilitate the seamless transportation of goods and commodities across India, high-speed, large-capacity railway corridors known as dedicated freight corridors have been established. These corridors integrate state-of-the-art technology and improved infrastructure, promising enhanced efficiency and effectiveness in the logistics operations.
- Multimodal logistics parks: The development of multimodal logistics parks is a strategic step towards providing comprehensive freight-handling facilities. Spread across at least 100 acres, these parks offer access to various modes of transportation, including road, rail, and air. They also provide advanced storage solutions like mechanized warehouses and cold storage facilities, along with essential services like customs clearance and quarantine zones. By reducing freight costs, warehouse expenses, and vehicle congestion, these parks aim to optimize logistics operations and enhance overall supply chain efficiency.
- Parivahan portal: To standardize processes and promote seamless information sharing across different locations, the government has introduced the Parivahan portal. This digital platform encompasses SARATHI for driving license processes and VAHAN for vehicle registrations. Both functionalities are consolidated within a single user-friendly mobile application, ‘mParivahan’. This initiative streamlines administrative procedures and provides easy access to information related to registration cards and drivers’ licenses, facilitating smoother logistics operations.
- Introduction of the e-way bill: The implementation of the e-way bill system mandates the use of electronic documentation for truckloads valued above INR 50,000. This digital documentation eliminates the need for physical paperwork and state boundary check posts, simplifying inter-state vehicle movement. By reducing turnaround time and bureaucratic hurdles, the e-way bill initiative enhances logistics efficiency and expedites overall supply chain movement.
Key trends steering India’s logistics performance in 2023
Technology, data, and infrastructure trends indicate that 2023 is a year of dynamic shifts for the logistics industry. Any period of change and transformation brings with it opportunities for businesses to leverage with the right tools and growth goals. Some of these include adopting cutting-edge technologies, harnessing the power of data, and fostering collaborative digital ecosystems to facilitate supply chain streamlining. These strategies are also creating space for niche start-ups as companies seek to outpace competitors and meet the ever-evolving expectations of customers.
The integration of advanced solutions is revolutionizing logistics operations, enhancing efficiency, and unlocking new opportunities. Key technologies shaping the future of logistics include:
- Artificial intelligence (AI) and machine learning: AI-powered algorithms and machine learning models enable predictive analytics, demand forecasting, route optimization, and real-time decision-making. These tools empower businesses to optimize their supply chains, improve resource allocation, and deliver enhanced customer experiences.
- Internet of things (IoT): With the proliferation of IoT devices, logistics companies gain greater visibility and control over their assets and inventory. IoT sensors and connectivity facilitate real-time tracking, remote monitoring, and predictive maintenance, enabling proactive and efficient logistics operations.
- Robotics and automation: Automation technologies, such as robotic process automation (RPA) and autonomous vehicles, are reshaping warehouse operations and last-mile delivery. Robotics streamlines repetitive tasks, reduces errors, enhances speed, and improves safety, leading to cost savings and increased productivity.
Data-driven decision making for operational superiority
In times where data reigns supreme, logistics companies must harness the power of data to drive informed decision-making. By adopting robust data analytics capabilities, businesses can gain actionable insights and optimize various aspects of their operations. We discuss some ways how:
- Predictive analytics: Leveraging historical and real-time data, predictive analytics enables businesses to anticipate demand fluctuations, optimize inventory levels, and enhance supply chain resilience. Accurate forecasting minimizes stockouts, reduces inventory holding costs, and improves overall operational efficiency.
- Supply chain visibility: Comprehensive data integration and visibility across the supply chain enable end-to-end traceability, proactive issue identification, and prompt problem resolution. Real-time data sharing fosters collaboration, enhances communication, and builds trust among supply chain partners.
Robotics and drone technology
The utilization of robotics and drone technology in logistics is increasing rapidly. The global logistics robots market, valued at US$7.11 billion in 2022, is predicted to reach US$21.01 billion by 2029, driven by a growing need for complex supply chain operations, e-commerce fulfillment services, and adoption of warehouse management software solutions.
Drones have become essential in the industry, providing solutions for various needs, such as surveillance, access to remote locations, urgent deliveries, grade A warehousing, and reverse logistics. Large e-commerce companies like Amazon and Google have integrated delivery drones into their operations. Additionally, DHL and Walmart are experimenting with autonomous systems and robotics.
ONDC’s technology-driven solution for streamlining the retail supply chain
The growth of direct-to-consumer (D2C) customers is particularly prevalent in tier 2, 3, 4, and rural sectors. As per industry estimates, the Indian e-commerce industry is expected to grow by 50-60 percent in D2C and new categories by 2030, reaching US$350 billion. This is due to improved digital payment and banking systems and faster internet access. However, meeting the increasing demand for fast and reliable last-mile delivery services is also crucial.
To address this challenge, the ONDC aims to use technology and data analytics to automate and simplify the retail supply chain, connecting suppliers, wholesalers, and retailers. This is expected to create a more efficient, transparent, and effective supply chain where demand is matched to the nearest provider.
Rise of cross-border e-commerce
The logistics industry has been significantly impacted by the rapid growth of e-commerce, which has led to an increase in demand for international goods and MSMEs selling internationally. This growth is driven by millennials who make up a large portion of the professional purchase decision market and expect online shopping interfaces. Therefore, efficient and reliable delivery services have become necessary, leading to the rise of cross-border digital markets that have seen significant economic growth.
To meet the challenges presented by cross-border delivery, such as customs and duty laws, language barriers, and payment options, businesses need to carefully plan their operations. Logistics firms with a robust network and digital infrastructure capable of providing end-to-end solutions and support for cross-border e-commerce will be best suited to serve these customers.
Embracing digital ecosystems: Collaborative partnerships for success
In today’s interconnected world, logistics success lies in building strong digital ecosystems and forging collaborative partnerships. By joining forces with key stakeholders, businesses can leverage collective expertise and resources to achieve operational excellence in the following ways:
- Ecosystem collaboration: Collaboration with technology providers, logistics service providers, and customers fosters innovation, promotes knowledge sharing, and accelerates digital transformation. Collaborative ecosystems enable seamless integration, streamline operations, and deliver superior customer experiences.
- Supply chain orchestration: Advanced platforms and digital marketplaces facilitate end-to-end supply chain orchestration. By leveraging these platforms, businesses gain access to a wide network of suppliers, transporters, and service providers, optimizing logistics operations and reducing time-to-market.
The warehousing industry is set to grow to US$27.35 billion by 2026 due to increased demand for storage and faster delivery times in tier 1 and tier 2 cities. To support this growth, the government is establishing multimodal logistic parks and other initiatives that connect urban transport to railways, attracting investments from institutional funds and developers.
Private players, such as CCI Logistics, Gateway Distriparks, and Transport Corporation of India, have also invested in state-of-the-art facilities for supply chain operations. One important aspect of warehousing is establishing agreements with warehouse service providers that are mutually beneficial and take into account the handling of exceptions and managing unforeseen disasters.
Green logistics technology
The implementation of green logistics technology, which includes climate measurement tools, real-time data-gathering tools, electric vehicles, green cold chain solutions, electric cargo delivery drones, and logistics resource management platforms, can have numerous benefits like reducing waste, simplifying processes, improving a company’s competitiveness, and being environmentally friendly. Several companies, such as Spencer, Bigbasket, Amazon, Licious, Myntra, and Flipkart, have partnered with Zypp Electric for their last-mile delivery through e-vehicles and e-vehicle fleet management.
- Freight Forwarding Industry in India: Market Outlook and How to Set Up
- Integrating with Global Value Chains: Sector Opportunities and Challenges in India
- Delhi-Mumbai Expressway: Delhi-Dausa-Lalsot Section of India’s Longest Expressway Opens
- Export-Import in India FY 2023: Trends and Key Procedures
India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to email@example.com for more support on doing business in India.
We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.
- Previous Article The EU Carbon Border Adjustment Mechanism: New Green Trade Restrictions to Impact Businesses in India
- Next Article India Amends Anti-Money Laundering Law to Include Accounting Professionals, Company Representatives like Directors