NEW DELHI : Logistics is considered an apt barometer to understand the health of an economy. Its pivotal role — and its weak spots — was on display during the two pandemic-ridden years, especially when it swung into action to deliver oxygen cylinders and vaccines in every corner of the country. The outlook for the industry is promising in 2022, says stakeholders. The government is focussing on building infrastructure now and as the economy opens up, logistics would find this a good runway to take-off.
The sector has had an eventful 2021. Manufacturing activity opened up, resulting in increased demand for logistics services, particularly after June. Globally, supply chain disruptions chained down the logistics sector, and this situation might not get resolved quickly. Despite that, the logistics sector in India reported a strong recovery in H2 FY2021, with a growth of 9% sequentially in Q4 FY2021. This was in sharp contrast to the steep decline in revenues and earnings reported over Q1 FY2021, said rating agency ICRA.
The year 2022 will be buoyant for logistics, says Suresh Kumar, CEO, Allcargo Logistics Ltd. “The learnings from the lockdown year of 2020, the focus on building resilience, the rise of e-commerce, acceleration of digital, new technology adoption and green logistics will power the sector in 2022 and beyond. The disruptions in the supply chain caused by imbalances on many fronts will gradually ease. With continued government emphasis on ease of doing business and initiatives like Gati Shakti, massive investments in infrastructure, emphasis on public-private partnerships the sector is set for rapid growth,” he says. He is not alone in expressing such views.
Ashvini Jakhar, Founder & CEO of supply chain platform Prozo, says the sector will continue to enjoy favourable tailwinds. He even sees an extended cycle of growth — at a CAGR of 9-10%. “This growth is mainly fuelled by rising demand, coupled with more consumers adopting e-commerce. Over 130 million shoppers spent $46 billion in 2021. By 2025, the number of online shoppers is expected to grow to 300 million and the e-commerce GMV to $110 billion. The newer models of e-commerce such as q-commerce (on-demand delivery) will further contribute to the demand growth of logistics services,” Jakhar explains.
A visible effect of the Covid phase (that still continues) has been the accelerated use of digital technologies in logistics and supply chain systems. Omicron has further pushed the need for rapid adoption of digital technologies among logistics firms. Industry stakeholders affirm that this trend will gain momentum in 2022.
New and interesting supply chain models are being developed across industries as the focus moves to improve customer experience and deliver goods faster, says Pushkar Singh, the CEO & Co-founder of last-mile tech-logistics platform LetsTransport. “We continue to be very bullish on EV (electric vehicle) adoption in logistics and are actively enabling the whole EV ecosystem in the commercial vehicle space. We believe this will be a game changer and bring in significant benefits to all in the value chain.”
Technology-enabled logistics is certainly going to be the new normal in a post-Covid business environment. This rapid adoption of technology has enabled manufacturing and retail industries to revisit the well-established inventory management practices. A streamlined and more efficient logistics system means more companies can adopt just-in-time systems, reducing cost and storage space for manufacturers.
Same-day delivery and instant delivery models will continue to evolve through the year and this will lead to more dark stores and need for express logistics, points out Prasad Sreeram, CEO & Co-founder of intra-city logistics platform COGOS.
Many businesses are transitioning to online commerce and transforming their supply chain. Harsh Vaidya, Founder & Ceo, WareIQ says the rapid fire pace of digital metamorphosis is being reconsidered in Indian logistics. This year, he says, robotization, artificial intelligence and data analytics would be the major driver for the sector.
Transportation & warehousing will give momentum to technology adoption, says Anjani Mandal, CEO of Fortigo Logistics. The focus will be around cloud-based solutions for digitalisation of the transportation process. All this growth will mostly be seen among organised players, Mandal adds.
D2C to be the next bastion for growth
The pandemic has accelerated demand for e-commerce and D2C (direct-to-consumer) businesses. Tech-based logistics firms are already assisting e-commerce and D2C firms to execute smooth supply chain and last-mile delivery operations at low costs. India has over 800 D2C brands, and the sector was worth $44.6 billion in 2021 and is projected to touch $100 billion by 2025, says KPMG. Experts say this means the next wave of growth for logistics firms could come from the D2C segment.
In 2022, logistic companies will adopt the latest technologies and experiment with visionary ideas like artificial intelligence and machine learning, says Kushal Nahata, CEO & Co-founder of logistics platform FarEye. With the help of these AI-based tools, Nahata affirms, firms will achieve proactive and predictive visibility, giving them a competitive edge. “Besides, there will be a growth of autonomous vehicles that will eventually become the future of the logistics industry, reducing costs and environmental damage and increasing efficiency by automating delivery packages,” he says.
All the optimism aside, one question that has started haunting logistics firms is will the Omicron variant make a dent in the sector’s revival and prospects. The information available currently indicates most Omicron cases are asymptomatic and require significantly lower hospitalisation among vaccinated people. Can that make the stakeholders hopeful?
Prozo’s Jhakar says while the Omicron variant may affect global supply chains, the variant is unlikely to stop the sector’s revival. The fundamentals of India’s economy centre around domestic demand and e-commerce enabler infrastructure continue to be strong. Also, the players in the ecosystem are likely to handle any temporary disruptions better now than how they did it in March 2020, he says.
As the sector heads into the new year, stakeholders have also highlighted the need to address key bottlenecks that might derail their growth plans in 2022.
Fortigo’s Mandal says he hopes the new year will bring some resolutions to the sector’s key operational barriers. As things currently, several large organisations continue to have terms of business and payment processes that cross the line of fairness. “Big companies can change terms of business and rates at their discretion. The force majeure clause has been deleted and contractually, natural disasters are not considered as a valid exclusion from high penalties. Also, payment terms are defined as ‘after 45 days’ instead of ‘within 45 days. Digitally signed e-invoices are not being accepted even though these are valid by law,” Mandal says.
These issues have a bigger bearing on smaller logistics players, especially those in the SME category.
Experts also say the quality and quantity of logistics infrastructure and services need to improve and this needs to be done for the long haul. They also want India’s logistics cost as a % of GDP to be reduced to 9-10% from 13.5% now. This is the only way India can take on international competition and become a global logistics hub — factors that will stimulate economic growth.
Experts point out that access to better warehousing infrastructure; easy-to-use and economical supply chain technology; faster rail, road and sea logistics networks, among others, are key enablers for the sector’s growth. They reiterate that the operating and regulatory framework of warehouses needs to be improved.
It is a long wish list, but if 2022 is to be the year India becomes a global logistics hub, these steps should be expedited.