A comparison between the Indian logistics ecosystem and its peers from the West would show differences that prop up the former’s deficiency in key indicators like efficiency, visibility and cohesion. These market conditions generate chaos and lead to far higher logistics costs, with India spending roughly 14% of its GDP on the industry – a number that hovers around 8% in the U.S. and Western Europe.
One of the key challenges that the Indian logistics sector contends with is that consumer logistics demand has steadily increased alongside innovations percolating into supply chains.
“If you look at the industry from a macro perspective, there had barely been any change since the containerization era for several decades. But now, the surface transport segment has been completely overhauled,” said Nishith Rastogi, the CEO of Locus, an India-based logistics technology startup. “Though consumer logistics is just about 10% of the market, it does bring change to buyer expectations.”
Rastogi explained that Amazon’s notion of expedited delivery has led to a dramatic shift in logistics operations – all within the space of a decade. “Today, we see very strong trends in the 3PL [third-party logistics] industry, where the focus has shifted from cost to customer experience, because for many of the companies, their last-mile deliveries directly touch their consumers,” he said.
This has created an ecosystem where consumers are at the center of logistical operations, rather than being considered as one amongst the different stakeholders in the supply chain. Such a change in perspective has given impetus to last-mile visibility; customers can reschedule, request track-and-trace and ask for precise delivery time windows.
“The gap between consumer demand and delivery sophistication arises from the consumption side as logistics is now a competitive differentiator and not just a cost center,” said Rastogi.
The Indian government has also chipped in with its share of regulations that help ease freight flow across the country, transcending state borders. A critical reform was the Goods and Services Tax (GST) that removed complex state and central taxation layers and replaced them with a single tax structure, quickening freight movement, while also making it more seamless.
“The GST expectedly dropped logistics spend by about 75 basis points, simply because trucks are not standing at state borders now, doing paper verification,” said Rastogi. “For instance, the average non-urgent surface transport dropped from three days to two days between Delhi and Mumbai. A simple change in how the paperwork is dealt with will bring a significant change in entire transportation costs.”
India is also rapidly improving its road networks and implementing technology like fast tags at highway turnpikes, which is expected to increase the average speed of freight movement.
The trucking industry is also looking at AIS 140 regulations, which are similar to the electronic logging device (ELD) mandate of the U.S., requiring drivers to have devices in their cab, sending out real-time updates to government servers. “All the 40 million commercial vehicles in India are expected to undergo the AIS 140 mandate over the next two to three years. So we are seeing a huge level of adoption among GPS device players in the market,” said Rastogi.
However, like the ELD mandate, there has been a vocal pushback against the AIS 140 mandate, as truck drivers find it to be an unnecessary addition to their workplace – a move that Rastogi considered to be quite Orwellian in nature, as it tramples on driver privacy.
“This is a classical problem of any system where the buyer and user are different. The buyer is the fleet operator, who’s doing it either to get better tracking or to stay compliant with the government regulation. The user is the driver who’s not gaining anything out of it,” said Rastogi. “Unless the technology also directly helps the user, the adoption rates will remain a key challenge.”
Future of Supply Chain
JUNE 21-22, 2023 • CLEVELAND, OH • IN-PERSON EVENT
The greatest minds in the transportation, logistics and supply chain industries will share insights, predict future trends and showcase emerging technology the FreightWaves way–with engaging discussions, rapid-fire demos, interactive sponsor kiosks and more.