Is demand enough to bring scale for the logistics sector?

June 17, 2021 12:03 PM

Of the unorganized market, trucking makes up the largest share as 85% of the Indian trucking market is made up of small fleet owners with 5-20 trucks.

logistics, infrastructureTechnology can act as an enabler for truck drivers as well as shippers.

By Nilesh Ghule

Characterized as one of the most unorganized sectors in India, the logistics industry presents high growth market opportunities for those who aim to organize the market and improve efficiencies. A report by Avendus Capital says that more than 80% of the overall logistics spend in the country goes to the unorganized sector. Of the unorganized market, trucking makes up the largest share as 85% of the Indian trucking market is made up of small fleet owners with 5-20 trucks. To add to it, because truckers are regional, 30-50% of forward truckloads return empty. These numbers depict the challenges around wastage of resources, high cost, heavily intermediated returns, and redundancies in the sector.

While the industry is ailing with these challenges, it is also recording a surge in demand as COVID-19 has accelerated the shift to digital shopping by three to five years. In addition, customer expectations are increasing, as they expect to get goods faster, more flexibly, and of course at low or no delivery cost. With all these, logistics disruption and gaps in the supply chain have surfaced more prominently.

Increasing demand is hence not enough for the logistics sector to thrive. There is a need to transform the sector from just a support provider to an essential service provider. Ease in placing orders online, receiving the products in required condition at the required time, reducing the wastage due to returns, overall customer experience, all these will play a critical role as the sector is poised to grow in double-digit. Thus, extensive use of technology, strategic approach to network creation, breeding the talent pool, and enforcing governance will play a pivotal role in the development of the sector. These will also help in establishing the logistics ecosystem, achieving operational efficiencies, and gaining the economic benefits of size and scale.

With the thrust on road infrastructure and increasing investment by the government, deeper penetration is possible. Technology can act as an enabler for truck drivers as well as shippers. While shippers can define their needs for the load size and routes, truck drivers can also register themselves by defining their truck types and corridors they want to operate on. This can enable creating the network and deploying the capacity optimally. At TruckBhejo, using technology, we have been able to tap into this huge supply of truck owner-drivers in India and mobilize them for our customers giving them full flexibility to scale up and down basis their requirements. We have also ensured 100% deliveries during the peak seasons and in remote locations.

As technology advances, infrastructure develops, and demand continues to originate from more and more sectors, the need for the workforce becomes eminent. While we work towards organizing and modernizing this sector, developing the manpower will be critical. We rarely see specific portals and platforms to scout for trucking partners and other specialized personnel in the logistics industry. As the sector is poised for growth, it offers multiple employment opportunities across the levels. A report published by Deloitte said that in 1991, there was one driver per truck in India. In 2019, about 27% of the trucks were idle due to a lack of drivers and the report also projected that driver shortage is likely to reach 50% by 2022. Tech-enabled platform solutions are essential if India wants to address this shortage effectively. Organizing and pooling the talent under a common platform and attracting more skilled labourers to join the cadre are crucial to keep up the pace with increasing demand.

We need to upskill the existing pool of drivers and train them to use various tech platforms. Educate them of the advantages and the ease of using such advanced tools. Learn from them about the ground-level problems and give them solutions through modernization and innovation. Make them understand that technology is to bring speed and will aid them to take more trips adding to their earnings. Expand the use of technology beyond organizing the network. Use data to study why road accidents happen, train the truck drivers using these analytics and provide them with advanced safety tools, replicate the best practices from developed countries like building pit stops at specific distances, use geotagging even for manpower in current situations where more and more truck drivers are catching the virus. All these will not only save lives but will also draw more hands to this sector. Introduce automation in loading, unloading, queue management, and goods handling. Create a pyramid of skilled labour and driver community, sophisticated vehicles, packaging solutions, handling staff, extensive and integrated technology that can talk to the multiple aspects with speed, accuracy, and transparency. At TruckBhejo we work very closely with owner drivers and help them educate and embrace technology tools that enable them to be more efficient and compliant with the government laws

As we work towards attracting and developing the talent pool, devise the right strategy too. In India, we do not have well-defined rules and policies. A lot is done around simplification and digitization of documentation making financial tracing easy. However, no due emphasis is given to revisit existing laws governing the sector. What we initiated in 2020 before the pandemic hit the world, it is now time that we formalize the National Logistics Law. Define every element that will be under the purview of the law to reinforce product, process, and people management as we aim for scale in the logistics space.

Reports suggest that the Indian logistics sector, ~USD 200 billion in size, is set to grow at over 10% CAGR in the next five years to reach ~USD 320-330 billion. Growth in demand can be a start point, but growing in size and scale will demand more fuel and power. Companies now no longer view logistics just as a business enabler but as a strategic differentiator for long term growth and value creation

So, deliberate less, act more, and execute the most!

(The author is Co-founder and CEO, TruckBhejo. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)

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