By R.S Subramanian
The logistics industry in India is undergoing a transformative phase, with several key trends driving its growth and development. From advancements in technology to shifting consumer behavior to significant improvements in infrastructure, some key trends are set to shape the future of logistics in India for years to come. This column will examine these trends and their implications for the industry in 2023.
Logistics Trends that will pick up in 2023 in India
1. National Logistics Policy and its impact on logistics and global trade in India
The National Logistics Policy of India has the potential to boost trade within and outside the country. As it seeks to integrate various logistics services and create a seamless supply chain network, it will increase the competitiveness of India’s logistics sector by reducing costs, improving efficiency, and increasing the use of technology. The policy also prioritizes the development of multi-modal transportation infrastructure, including ports, airports, and roadways, which will help to improve connectivity and reduce bottlenecks in the supply chain.
While the PM GatiShakti National Master Plan focuses on the development of integrated infrastructure and network planning for efficiency in services (processes, digital systems, regulatory framework) and human resources, the National Logistics Policy is envisaged to provide a comprehensive agenda for the development of entire logistics ecosystem. By implementing these measures, the national logistics policy of India has the potential to attract investment and create job opportunities.
2. Rise of Cross-Border E-commerce amongst the Indian Consumer
The rapid growth of e-commerce has profoundly impacted the logistics industry. As per DHL’s Ecommerce Guide (2021), the next wave of e-commerce growth comes from consumers’ increasing demand for international products and the general rise in MSMEs (Micro, Small and Medium Enterprises) selling overseas. This trend is also impacting the B2B market. Today, millennials account for 73% of all professional B2B purchasing decisions and they want an online interface. Therefore, the demand for efficient and reliable delivery services has skyrocketed with more consumers turning to online shopping. Cross-border digital marketplaces overall have experienced tremendous economic growth.
Hence, companies must adapt to handle the unique challenges posed by cross-border deliveries, such as customs and duties regulations, language barriers, and diverse payment methods. Logistics companies with a strong network, digital infrastructure and can offer end-to-end solutions and support for cross-border e-commerce will be best positioned to serve these new-age buyers.
3. D2C category driving growth in smaller and rural markets
The D2C customer category is growing especially in Tier II, III, IV and rural markets. According to India Brand Equity Foundation (IBEF), the e-commerce market in India is expected to reach USD 350 billion by 2030, with 50-60 per cent increase in D2C and untapped categories. This development results from better and faster internet connectivity, improved digital payments and banking channels. However, what is also needed here is the ability to cater to a growing demand for fast and reliable last-mile delivery service.
The expansion of brands and marketplaces, combined with rising customer expectations, will require improved services and increased capabilities in logistics. The national logistics policy will play a crucial role in addressing these challenges and ensuring India’s e-commerce sector’s growth. Implementing the Open Network for Digital Commerce (ONDCs) in India is expected to revolutionize the retail and e-commerce industry in the country.
ONDC, at present, aims to digitize and streamline the retail supply chain by using technology and data analytics to connect suppliers, wholesalers, and retailers. Ideally, this will lead to an improved, efficient, and transparent supply chain where demand is matched to the closest supplier. Watch this space!
4. Improving resilience through supply chain diversification:
The COVID-19 pandemic and recent geopolitical events have highlighted the risks of relying on a single supplier. In response, many industries have started diversifying their supply chains through onshoring, nearshoring, and friend-shoring suppliers, among other tactics. India has been one of the gainers of this trend. If we see The DHL Trade Growth Atlas 2022, South Asian countries – specifically, India, Vietnam and the Philippines stand out in both speed and scale of projected trade growth through 2026. All three have the potential to benefit from efforts by many companies to diversify China-centric production and sourcing strategies.
The study substantiates the EY Industrial Supply Chain Survey, which found 77% of respondents stating that they are increasing the number of suppliers and 63% are expanding their suppliers to more countries. Ensuring supply chain resilience is now a key focus for industry players, emphasizing efficiency and operational excellence and the supply chain’s role in creating tangible value.
5. Green logistics is becoming a priority
There is growing public awareness of climate change and it is influencing how companies conduct business. We see an increasing commitment by companies and governments to reduce their carbon footprint and become more sustainable. This includes implementing low-carbon solutions with the use of alternative energy and electric vehicles. Customers are also becoming more aware of the environmental impact of their purchases and are looking for better options, such as shopping with “green” brands and selecting sustainable delivery options. According to the World Economic Forum, a net-zero supply chain will increase prices by no more than 4% on average – a small investment for a significant change. Hence, the pressure to be carbon neutral or even carbon negative in the logistics industry is stronger than ever.
“Given the importance of supply chains in decarbonization discussions and agendas, logistics organizations must make the necessary changes as soon as possible. They (companies) should adapt to the changes to come, ensuring they deliver in an era of sustainability,” the report says. In India too, we now see some of the first commercial four-wheeler electric vehicles coming on the road. For example, DHL Express is all set to roll out its first pilot of electric vehicles for pick-up and delivery in the coming weeks in the country. The aim is to electrify at least 30% of the delivery fleet by 2030.
Of course, as we enter this new year, it is pertinent to note that the market forces have changed drastically in the last 2 -3 years. During the pandemic, the biggest ask was for connectivity and fulfillment as global supply chains were disrupted and logistics capacity severely constrained. As we exit the pandemic and prepare ourselves for a recessionary environment globally, we can also anticipate changes in consumer demand. Businesses will need to be more efficient, provide better customer experience and value to support them in their battle in an increasingly challenging economic climate. Time for the logistics service providers to measure up!
(R.S Subramanian, SVP South Asia, DHL Express. Views expressed are author’s own.)