The Indian logistics sector is evolving from being a pure transport provider to an integral part of the India growth story. By 2030, it would set the benchmark for global players.
AN Increasing awareness of the crucial role of logistics and supply chain in India’s growth has made the sector progress rapidly in the last few years.
India has forged ahead to the 35th rank in 2016 from the 54th rank in 2014, in the global ranking of the World Bank’s 2016 Logistics Performance Index. The recent introduction of GST and the appointment of a separate Secretary under the Ministry of Commerce as the nodal agency means that India is moving in the right direction.
The sector is currently estimated to be at $160 billion and employs more than 22 million. However, the cost of logistics is still significantly higher (12-13 per cent) when compared to the global benchmark (7-9 per cent). However, both the user industry and service providers are now fully aware of the need for addressing the core hygiene factors like visibility, skilled workforce and creating the ecosystem. They are also thinking about how the supply chain can become the differentiator for themselves and the products they manufacture and service.
Skill gap in logistics
The Logistics Sector Skill Council and the various players are struggling to address the skill gap in this sector, considering a significant growth taking place. There are other gaps to be addressed, including, how to integrate the waterways and coastal domestic shipping with the growing road network and the role of the railways. All of these are going to require substantial investments in infrastructure, technology and skill upgradation. This is what will determine the future of logistics.
India can take a cue from the issues and solutions found by other countries in this sector and leapfrog into the future without going through a long learning curve. Investments in infrastructure is an absolute necessity no doubt, but using digital knowledge and usage capability, is equally essential to ensure that each of the assets created is fully productive and has the least excess capacity or wastage.
Further, we must focus on striking the right balance between automation and workforce skill upgradation. As a country with the fastest growing population, the logistics sector has the unique capability to attract and absorb skilled and semi-skilled talent and also create self-employed entrepreneurs of small and medium scale companies. Our policy focus should also give prominence to the encouragement of both the user industry and the more prominent logistics companies to outsource and engage with smaller companies.
The best utilisation of infrastructure would be possible when the right value-added outsourcing takes place and both users and service providers are integrated through digital means. Already, the
government’s announcement on the common portal for the various ministries involved in logistics should pave the way for a better and connected world.
Future of logistics
India has the potential to scale heights where it sets the standards for the world to follow. The government will track every infrastructure investment (for example, port or airport), not only on the return of financial investment but also on a SMART Competitiveness Index. The metrics tracked will not only result in higher output but also lead to lower utilisation of physical effort. Routine activities will be digitised leading to greater efficiency. Efficient usage of digital tools will avoid repetition of activities and paperwork. Similarly, the integration between the various modes of rail, air, shipping should be digitally enabled and equal importance given to the last and first-mile connectivity.
I see all the cities, not just the SMART cities, planning the supply chain requirements for their users by discussing with the manufacturing sector, the retail industry and the service providers so that wastages are minimised. A logistics policy plan will be in place to encourage the right kind of outsourcing so that every profit centre gets utilised to the maximum extent and reduce the congestion on roads and prevent the lopsided utilisation of infrastructure.
By 2030, the Indian logistics policy will help Indian manufacturing companies become more competitive while projecting India as the knowledge hub for the supply chain sector. The skill development will take place through tie-ups with educational institutions from the school level to make the public aware of the employment opportunities and help them upgrade their skills continuously.
Automation will be encouraged, and the growth in the value-added outsourcing will make this sector grow at a faster pace than the average norm of two times the GDP growth.
India will become $1 trillion market in 2030 for logistics and segmentation will take place in 4PL, 5 PL and maybe even 6/7 PL. Such comprehensive measures would lay the bedrock that would enable India to scale its maximum potential.