MUMBAI : The logistics sector in India has always been about resilience, adapting to new technologies and agility. It has had a tumultuous yet promising journey over the last couple of decades, with continuously growing demand for higher quality services. In the recent years, the Indian government has had a renewed focus on investing into logistics infrastructure in the country, while at the same time encouraging investments from the private sector as well. This has led to much better rail connectivity & road networks and increase in the number of ports, inland container depots, and warehousing services throughout the country.
With better infrastructure, the Indian industry was able to plan its businesses in a more efficient manner, moving India closer towards becoming a manufacturing hub for the world. Manufacturers are now able to import raw materials with ease, export higher than ever before due to their competitiveness with global peers, while at the same time working on a low inventory model as the quality of rail transportation in particular has improved with assured transit times. Instead of relying on bulk transportation by road, manufacturers can now use container based rail transportation to tap into the global shipping networks with more ease and reliability, and reduced handling of cargo that reduces damages and pilferages. World class warehousing facilities have come up in a big way in the country, allowing for domestic distribution to reach a multitude of touch points in smaller towns and cities apart from the metros, as can be seen by the foray of eCommerce and express parcel shipments to every corner with demanding delivery times being met. According to a recent report by McKinsey Global Institute (MGI), India’s logistics sector would expand at a Compound Annual Growth Rate (CAGR) of more than 10 percent, from $200 billion in early 2020 to at least $320 billion in 2025. This subsequently changed in 2020 due to the pandemic and businesses came up with innovative solutions to plan for the future.
During the lockdown’s most rigid stages, road transportation for large movement of goods was fraught with challenges and difficult to manage, however rail has been the only mode of transportation that worked without limitations and hence essential businesses could transport goods and commodities across the nation, as well as participate in global import and export trade. This led to a surge in demand for customised logistics solutions, especially for essential goods that were required to be transported regardless of the lockdowns, and the entire logistics sector managed to keep up with their commitments to customers in this difficult period. In turn, the users recognised the value of efficient logistics services and have remapped their supply chain even as the impact of pandemic slowed down. As a result of this, in February 2021, for the first time since the outset of the pandemic, the Indian Railways saw a year-on-year growth in revenue, signifying the return of pre-covid levels of operation.
Post Pandemic: What does today look like for the Logistics Sector?
Today, the logistics sector is at its most dynamic embodiment and the credit goes to the numerous developments happening at a faster pace. Moreover, the cost of logistics is going down due to the shift to railways since rail freight is more efficient for longer distance and a sustainable method of transporting goods. The introduction of Dedicated Freight Corridor (DFC) by the government has reduced transit times and it has been a huge boon to the sector. DFC is a high speed and high capacity railway corridor that is exclusively meant for the movement of freight, or in other words, goods and commodities. It has two arms – Eastern DFC connecting Ludhiana in Punjab to Dankuni in West Bengal and Western DFC which connects NCR to Nhava Sheva, Mundra & Pipavav. The government has recently introduced PM Gati Shakti– National Master Plan for Multi Modal connectivity, which is a transformative approach for economic growth and sustainable development in the logistics sector. The plan focuses on seamless multimodal connectivity, planning-financing innovative projects and the use of technology in the sector.
Highlighting the present and future of the sector will be incomplete without throwing light on the benefits of deployment of high level of technology which has played a big role in optimising operations, route planning between hubs and spokes, and creating better supply chain visibility for manufacturers while reducing time consuming documentation processes. The utilisation of fleet and spare capacities across the country are better as technology helps narrow the bridge between supply and demand. The advanced tech based solutions has helped ease the challenges of warehousing and last mile operations.
There are various indicators of the sector witnessing a phenomenal growth over the next few years. For example, heavy investment in building infrastructure is important for all the sectors which the government is planning to invest in. Projects such as Sagarmala, Setu Bharatam, and other landmark infrastructure projects in the future will further help the sector. Network advantage of owned infrastructure is critical in this industry to be able to offer single window solutions to customers for all their supply chain needs, which has led to higher investment in the logistics industry from private companies. The industry is also gearing towards creating robust supply chains and modernizing warehousing solutions in the country. Reliability of service in this industry is key for importers as well as exporters since they plan to shift closer towards a Just-In-Time inventory model. The aim of the players in the sector is to work closely with suppliers so that raw materials arrive as production is scheduled to begin, but no sooner. Minimizing inventory will soon be the future of logistics and all major players will strive to achieve that. The Indian Customs is also helping trade with their 24×7 services at major EXIM locations.
As almost all other sectors, the logistics sector too is trying to adapt environment friendly practices and all major businesses are striving to be ESG compliant and sustainable as much as possible. Companies have recognized that the future is in alternative fuels like EVs, CNG & LNG and they are slowly working towards creating processes with more efficient alternatives like Rail Transportation.
Author : Prem Kishan Dass Gupta
Chairman & Managing Director, Gateway Distriparks