Logistics is the backbone of any economy. Being one of the fastest growing economies, India has great potential for significant growth in the logistics sector. With several large companies entering the market, logistics space is getting increasingly competititve and most players are looking leverage IT for competitive edge.
According to a study by The Associated Chambers of Commerce and Industry of India (ASSOCHAM), the logistics market in India is expected to grow to USD 307 billion by the year 2020. Further, the impetus provided by government initiatives, e-commerce penetration, and impending GST, will help the sector to grow further. The sector is expected to grow at CAGR of 16 percent on an average in the coming years with an inflow of new investments that will create new opportunities for the logistics sector, says the study.
We spoke to CIOs from the logistics, shipping, transportation and warehousing sectors to understand the business challenges they face and how they intend to leverage IT to overcome them. Here’s what G. S. Ravi Kumar, CIO at Gati Limited, Prasad Dhumal, Vice President IT at DHL Express India, Anjan Deb, GM-IT (CIO) at The Great Eastern Shipping Company had to say:
How is IT energizing the logistics industry for 2017-18? What are the major growth drivers for the industry?
G.S.Ravi Kumar: Lgistics industry has a direct correlation to the GDP of the country. Our industry grows approximately twice the rate of our GDP. The major boost comes from the increasing customer demand from the tier two and three cities, which is being further fueled by the increasing popularity of e-commerce. The requirement of the cold chain industry will also continue to drive opportunities for the organized third-party logistics service providers like us.
Prasad Dhumal: The art of spending on IT is not about spending a huge amount in buying and implementing the latest technologies. It is more about spending wisely by looking at the RoI Significant growth in the logistics industry is directly proportional to growth in other industries like auto, pharma, and FMCG. The increase in trade flow, the rise of e-commerce and online platforms, and investments from the private sector will also act as key drivers in the growth of the market for logistics.
Anjan Deb: The shipping industry has seen significant progress in deploying IT for day-to-day operations. The introduction of new technologies like mobility, IoT, cloud, and analytics, is leading to a huge transformation in the shipping section of the logistics industry. Businesses are using IoT and analytics by fetching live data from ships and monitoring them every moment.
As a CIO, how are you stepping up your digital game for this year?
Kumar: Historically, Gati has always been ahead in the game of technology adoption and ramping up its delivery capabilities. This year the company would be focusing on revamping its IT architecture to build a platform for the future. It goes without saying that the focus would clearly be on key areas like mobility, analytics, cloud and internet of things.
Dhumal: By deploying enabling technologies, DHL is now able to leverage automation to perform business better. We have been always aggressive in adopting newer technologies and the hype doesn't scare us. We have deployed a single system across our entire network, which provides us enhanced visibility and real-time tracking of vehicles and shipments.
Deb: The shipping industry is going through a huge revolution. We have developed analytical tools for monitoring weather, and checking engine factors and speed. We have also applied sensor-based performance monitoring system on board ships to enhance fuel efficiency and thus reduce greenhouse gas emission.
How is GST benefitting the logistics sector for this year?
Kumar: The immediate fallout of GST implementation would be the digitization of transactions, which means less physical documentation. The introduction of GST will also cut inventory costs by almost half for enterprises. Warehouses will get consolidated into four to five as against 20-25 across the country. Also, the logistic costs will shrink to 10 percent of GDP from 14 percent at present, with improvement in travel speeds.
Dhumal: With the GST implementation, the location of the warehouse would be more driven by the market forces of demand and supply. Post the GST, the smaller warehouses would be merged together to create larger ones for the customers.
Deb: GST is a welcome move as far as the logistics industry is concerned but it all depends on the rate of taxation. Post GST, the export freight services, taxes on fuel and goods, which are currently exempted, will be available as a credit under GST.
How is e-commerce driving growth for the logistics industry?
Kumar: E-commerce is one of the major drivers of the logistics industry. As the popularity of e-commerce is growing among customers, it is pushing supply chains to adapt to newer businesses models. Therefore, we have set up a dedicated e-commerce logistics arm to stay competitive in the market.
Dhumal: E-commerce is the future of logistics. As customers are becoming more used to digital services, Indian logistics sector needs to offer innovative solutions to satisfy their demands at competitive price levels.
Deb: With the rapid pace of the e-commerce market, and increasing customer demands, the logistics industry is being pushed to adapt in order to satisfy the growing requirements.
How is the sector planning to overcome the hurdles in 2017?
Kumar: GST will help organized sectors to accelerate growth. Enhanced IT capabilities will help us in becoming a market differentiator. We are strongly focusing on end to end solutions starting from express cargo, warehousing, e-commerce pickup and delivery to fulfillment and cold chain logistics.
Deb: Low penetration of new technology in the supply chain process results in damage to goods. Given the state of the industry, where no major players drive the direction of the market, the required investment in proper IT infrastructure is almost absent. Indian market needs to increase its warehouse capacity with advanced facilities.
Dhumal: A huge amount of taxes, slow market liberalization, and under-developed distribution channels are the main challenges for the logistics sector in India. We have developed strategies to deal with new challenges by maintaining minute-by-minute tracking of all our shipments while developing cost efficiencies, guaranteeing timely delivery, and anticipating problems and having backup plans.