The role of logistics in the Indian economy is quickly gaining more significance than the past couple of decades. Today, the logistics sector in India makes up about 10% of the industry. With the current contribution it has to the e-commerce industry, logistics companies help with storage and package and time-bound delivery of products, right at the customer’s doorstep.
Even with the landmarks achieved, there are still quite a few snags that the logistics companies in India are familiar with. This blog will help you to understand the challenges faced by logistics companies India in an all-encompassing light.
- Logistics Sector In India Overview And Challenges 2019
- High Order Intensity Ratio
- Transportation Roadblocks
- Rail Tariffs
- Port And Shipping Problems
- Lack Of Skilled And Specialist Personnel
- Slow Transition Into Newer Technologies
- Warehousing And Taxation Discrepancies
- Competition With Global Giants
- Customer’s Mindset
- Ever Increasing Fuel Costs
- Government Policies And Bottlenecks
- Shortage Of Drivers And Delivery Staff
- … And Here Is The Real Challenge
- What Can Be Done To Tackle Such Challenges For Efficient Functioning?
- Keep your processes flexible for greater control
- Understand when obsolete technology is causing you more harm than gains
- Prepare for an optimal down time by managing your processes effectively
- Take Into Account Transportation Delays With Satellite Navigation
- Optimize The Use Of Your Working Capital and Cash Cycles
Logistics Sector In India Overview And Challenges 2019
The logistics industry in India can easily be called the backbone of any sector’s supply chain. Be it the healthcare, hospitality or manufacturing industries, logistics companies play one of the most important roles of connecting the organizations to their clients.
An hours-worth delay in reaching the right medicine to the facility may lead to dangerous consequences, while failing to deliver high-value goods as per the client’s schedule may cause a loss of Lakhs of Rupees to both parties.
When we speak of logistics, everything is time-bound. Each process depends on the one preceding it and a minor delay on one stage causes a magnified ripple effect on all the other stages. By the time we reach the stage of delivery, there ends up being a delay of days because of a few hours of down-time.
Every logistics organization wants to achieve the same target: reducing the time for a supply cycle by streamlining processes efficiently. However, this does not always go according to the book and is to be expected.
From minor set-backs to acts of God delaying the entire procedure, logistics revolves around one concept, which is ETA.
Here is where we have it wrong. These challenges are merely a symptomatic mirror of the core issue, which is idealizing an ETA. When we fail to look at the big picture, we also fail to treat the root cause of the issues faced by logistics companies in India.
Today, we’re going to take a nice hard look at what we think the problems are versus what the real problem is.
Here are a few of the perceived challenges faced by Indian logistics companies in India:
High Order Intensity Ratio
Every Indian Logistics Company has faced the issue of receiving a bulk load of orders that would break their back while trying to keep up with the supply-chain timeline. Considering the high volume of orders received, it gets difficult to prioritize orders and deliveries while juggling too much on too little time. The challenge also pops up when the company has limited resources, thanks to the difficult payment cycles. Depending on the season to season, festival time is the best example of mass delays in delivery schedules and an overall failure to the ETA mechanism.
Even when the packaging and drops are conducted on schedule, the transportation industry is often unreliable. India is a huge country that covers a lot of different terrains subject to different conditions. The roads are terrible at internal parts of the country while the Ghats are prone to accidents and landslides. Traffic congestions, multiple checkpoints, and toll stations are also issues where Logistics companies lose out on a lot of time and money. All in all, even after taking extra delays into account, there is scope for even further delay.
The high costs of rail transportations and the hike in goods transportation tariff don’t make a positive impact on time-bound delivery since the Indian railways, too, suffer from a congested network. Seasonal problems such as floods during the monsoons lead to several services being canceled every hour and cause a huge loss to Logistics companies in India.
Port And Shipping Problems
Shipping goods from point A to B takes the longest time among all of the possible modes of transport. If the seas are kind, the ship may dock on time at the port. Unfortunately, understaffed ports, overstuffed berths and delayed evacuation of cargo cause the logistics companies to suffer without a fault. Costal ports have an infrastructural problem where large vessels fail to dock due to lack of depth. Hence, even with a costal port at a shorter distance, these companies have to choose a port or route farther away due to their cargo being shipped on larger vessels.
Lack Of Skilled And Specialist Personnel
There is a serious lack of skilled personnel and specialists in the Logistics sector in India. The laborers are under-skilled, over-worked and lack the desired skill-set to make the process more efficient. To save on capital, companies also compromise on the training of their logistics staff and also their payments. Eventually, these companies face problems like high labor turnover, increased training costs and under-performing human resources.
Slow Transition Into Newer Technologies
When we compare the logistics and supply-chains of more efficient countries like Japan, their work models, and strategies revolve around adapting to the latest technologies to achieve maximum productivity. The logistics companies in India fail to reach that potential when they don’t upgrade their technology with changing times. It might appear as if they’re saving on costs, but this approach causes more damage in the long run. Transitioning into new technology takes up unavoidable costs such as :
- Set-up and installation costs
- Bringing foreign trainers to train the workforce
- Time is taken to learn and integrate the process to actual productivity.
A company needs to keep in sight the big picture when incurring such expenditures. Sometimes the returns may not recover the full value of a big investment like technological upgrades, which may deter many logistic companies in India to push for this transition.
Warehousing And Taxation Discrepancies
Everyone is aware of the sad sight of poor warehousing facilities in India. Several cargos incur a lot of damage because of pest-infested warehouses, lack of storage space, damage due to leakages, and more. This is seen predominantly in low margin goods and cargo. The Governments use the biggest warehouses to store grains, which leaves very little space for cargo storage.
The layered and multiple tax structures also cause a loss of time to logistics companies on the road.
Competition With Global Giants
Being an Indian logistics company means little to the clients and end customers today, as global giants play in the same field with better services. By providing short supply cycles at competitive prices, the Indian logistics companies face a major challenge to keep up. With schemes such as free one day deliveries, these international organizations monopolize the attention and loyalty of customers while the companies in India can’t keep up with the costs of providing such services.
With the passage of time and globalisation, the customer experience has changed manifold. The industry competition which is meant to benefit them creates more demands from the customers. Such demands increase because the global logistics companies can deliver on their promises. Customers’ unwillingness to pay an extra fee for anything less than 2 days delivery time causes a lack of funds and source for the Indian logistics companies to be able to formulate better cycles.
Also, the overall expectations of customers increases when e-commerce organizations like Amazon have internalized and streamlined their entire logistics process.
Ever Increasing Fuel Costs
With the change in the prices of fuel, the biggest problem in transportation costs. Increasing fuel costs cause an increase in the surcharge to the freight tariffs. This, in turn, decreases the profit to be earned by the company, maybe even resulting in a loss in extreme cases.
Government Policies And Bottlenecks
With compliance mandates being tightened even more, the logistics companies in India face the consequence of bottlenecks with increased regulations.
Shortage Of Drivers And Delivery Staff
Every Logistics organization in India faces the problem of employing and retaining their deliver staff. The industry is subject to a shortage of delivery personnel, hence the workloads of multiple time-bound deliveries are placed on the current workers, leaving them burnt out and discouraged with the pressure.
… And Here Is The Real Challenge
All the above logistics problems in India more or less boil down to the challenges described above. But pause for a second and imagine that it is only a faced of the entire issue. There is, in-fact a bigger picture, which the logistics companies and everyone else fail to notice because they’re too busy treating symptoms rather than the root cause.
In the case of challenges faces by logistics companies in India, we can say that the root cause is how heavily we try to fix a precise ETA by remedying the said challenges.
Challenges such as policy changes, roads being damaged, and changing fuel costs are going to be a perpetual occurrence in the operational lifetime of an Indian logistics company. Blaming factors like these is comparable to blaming the rain for getting your hair wet. When it rains, we carry an umbrella.
So to set an accurate ETA and to maintain the supply cycle on the premeditated time (not a minute more, not a minute less), one has to take into consideration how to keep their word of a delivery time at all costs.
What Can Be Done To Tackle Such Challenges For Efficient Functioning?
When companies take complete control of their supply chain, it leaves a very marginal room for error or excuses. The following points may help you understand how to formulate and execute better strategies to integrate with the current logistics structure:
Keep your processes flexible for greater control
When you create fixed deadlines, you put yourself, the staffs and the service provider under a lot of pressure. This may hinder the workflow despite of it being a completely possible task. Always set room for delays while calculating transportation, docking and unloading time frames.
Understand when obsolete technology is causing you more harm than gains
You may be saving on some bucks right now, but the long term effect would leave you with a big hole in your pocket. The farther away your equipment and systems are away from the latest technology, the more expensive an upgrade and training is.
Prepare for an optimal down time by managing your processes effectively
Create an optimal space for pickup, packaging and all the other processes till the delivery by not wasting time on hand. One may think that starting early may be beneficial, while it could be time wasted, since the manufacturer doesn’t need you to reach before time.
Take Into Account Transportation Delays With Satellite Navigation
SatNav has made life easier for everyone by showing you in real-time the duration taken to cover a certain distance. The quality of the terrain and roads are reported, so you can mark them on your route. You can even use their logs to check for changes and delays caused due to traffic, accidents, breakdown and so on. If you plan the process accurately, there should be very little room for an erroneous calculation of the time taken.
Optimize The Use Of Your Working Capital and Cash Cycles
When it comes to the apt usage of your working capital for your processes, saving on processes is important as well. Investing your resources on things that make your logistics company more efficient while maintaining the quality are very important. For example, there can be better ways to save on your capital rather than reducing the labour wages paid per hour. While this may seem to save money, you’ll be spending more of it on training costs for the replacements of the seasoned employees that turned-over.
In conclusion, it is safe to say that the intricacies of logistics businesses in India are subject to external and internal challenges. By careful management, planning and realistic goal-setting, they can be overcome to be able to thrive, succeed and compete in the Indian economy with the international counterparts.