The growing economy has led to the emergence of innovative practices that allow business and public service to operate at a higher growth rate in an environment where the support systems are getting expanded jointly. Logistics and its management has played a very important role in defining the effectiveness of business and the value it holds for its customers.
Brands depend on the value logistics adds to their name as customers these days are mostly interested in their own convenience and they see the brands and their logistics system to satisfy their needs at the earliest.
The Indian logistics sector comprises of the entire inbound and outbound segments of the manufacturing and service supply chains.
Inbound logisticsis one of the primary processes of logistics which involves purchasing and arranging the inbound movement of materials, parts, or finished inventory from suppliers to manufacturing or assembly plants, warehouses, or retail stores. E.g. As soon as an order is initiated on the store’s website, the raw materials must be brought in and the products must be made and escorted out of the manufacturing unit.
Outbound logisticsis the process related to the storage and movement of the final product and the related information flows from the end of the production line to the end user. E.g. When the product has been assembled and made, it then has to be marked with the proper stickers with the correct address so as to ensure smooth flow of the process.
Two of the most important parts of logistics that have changed the working of user-seller relationship are:
Procurement logisticswhich consists of activities such asmarket research, requirements planning, make-or-buy decisions, supplier management, ordering, and order controlling. The targets in procurement logistics are maximizing efficiency by concentrating on core competences, outsourcing while maintaining the autonomy of the company, or minimizing procurement costs while maximizing security within the supply process.
Reverse logisticswhich denotes all those operations related to the reuse of products and materials. The reverse logistics process includes the management and the sale of surpluses, as well as products being returned to vendors from buyers. Reverse logistics stands for all operations related to the reuse of products and materials. It is the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for recapturing value or proper disposal. More precisely, reverse logistics is the process of moving goods from their typical destination for capturing value, or proper disposal.
The Indian logistics sector has typically been driven by the objective of reducing transportation costs that were inordinately high due to regional concentration of manufacturing and geographically diversified distribution activities as well as inefficiencies in infrastructure and accompanying technology. Freight movement has slowly been shifting from rail to road with implications on quality of transfer, timeliness of delivery and consequently costs except for commodities which over long distances, predominantly, move through the extensive rail network.
The most essential challenge faced by the industry today is insufficient integration of transport networks, information technology and warehousing & distribution facilities. Regulations exist at many different tiers, is imposed by national, regional and local authorities. However, the regulations differ from city to city, hindering the creation of national networks.
Trained Manpower is essential both for the third-party logistics sector as well as the manufacturing and retailing sectors, which is very weak at a practical level, i.e., IT, driving and warehouse as well as at a higher strategic level. The disorganized nature of the logistics sector in India, its perception as a manpower-heavy industry and lack of adequate training institutions has led to a shortfall in skilled management and client service personnel. There is a lack of IT standard, equipment and poor systems integration.
Poor facilities and management are the reason for high levels of loss, damage and deterioration of stock, mainly in the perishables sector. Part of the problem is insufficient specialist equipment, i.e. proper refrigerated storage and containers, but it is also partly down to lack of training. The practitioners and the academicians are now aware of the importance of logistics and supply chain; however, the field is still under penetrated as far as research is concerned. It is essential to prioritize research and development so that the weaknesses in the industry can be taken care of and improved.
Solutions to some of the challenges
Infrastructure is the backbone of every country’s growth and prosperity and for the logistics industry to flourish special emphasis has to be on building world-class road networks, integrated rail corridors, modern cargo facilities at airports and creation of logistics parks which need to be given a status equivalent to Special Economic Zones.
It is necessary to realize that the benefits which can best be practiced in logistics industry can be brought about by the companies by establishing training intuitions, so that there is improvement in the overall service quality of the sector. Good storage and Warehousing facilities are important for the growth of the logistics industry. With the increase in the transportation of perishable products, the logistics agencies need to give a lot of importance to enhancing the Warehousing facilities.
Warehousing is required to go to the next level considering the changing dynamics of JIT manufacturing, global procurement and new models of sales and distribution. Emphasis on research and development is potent mainly because it encourages the use of indigenous technology which can make the industry cost competitive and can also bring about improvement in services thereby using better, effective and efficient services. Focus has to be on research in process excellence which can help to eliminate inefficiencies and bring Indian logistics on par with global practices.
The logistics firms are moving from a traditional setup to the integration of IT and technology to their operations to reduce the costs incurred as well as to meet the service demands. The growth of the Indian logistics sector depends upon its soft infrastructure like education, training and policy framework as much as the hard infrastructure.
To support India’s fast paced economy growth of logistics industry is very essential. It is estimated that the Indian logistics industry will continue to show robust growth of 10-15% annually, leading the pace of growth of the economy at large.
The global economic outlook, indeed that of India is expected to significantly improve as India Inc begins to tackle the economic downturn. With a new government, many policies are expected to be implemented which will give a fresh impetus to India’s growth engine particularly in the corporate and SME sector which in turn will expand demand for the logistics sector.
With the implementation of GST, the logistics companies, which are currently forced to set up many small warehouses across multiple cities can set up just a few, big warehouses region wise and can follow the hub-and-spoke model for freight movement from the warehouses to the different manufacturing plants, wholesale outlets, retail outlets and the various POS. This growth is backed by the boom in the e-commerce sector and expansionary policies of the FMCG firms.
This has increased the service geography of the logistics firms but they also should meet the demands of quick delivery and tight service level agreements. The industry has moved from being just a service provider to the position which provides end to end supply chain solutions to their customers. Thus, all this has paved the way for further growth of Logistics and Warehousing industry in the coming years.
With the current speed that the Indian logistics is moving at, we can only expect the freight of goods to be exceptionally fast in the next few years or so which would lead to a much stronger foundation for the digital shopping experience motivating more people to shop from home.