In the context of logistics networks, the problems that induce inefficiencies within supply chains in India are largely similar to the ones in developed countries – like excessive fragmentation and an industry steeped in manual and paper-based practices. Then again, the issues go far deeper in India, because the country has a population that is realizing the ease of ordering online and a transportation network that needs serious modernization.
Though the urban populace in India is fairly well-versed with e-commerce, large swathes of the population in the towns and villages across India are still oblivious to shopping online or are uncertain of digital transactions. In such regions, mom and pop stores control a large share of the market, bringing in larger crowds than the ones that head to local department stores and supermarkets.
Nonetheless, the impact of e-commerce cannot be discounted. “The boom in e-commerce has led to a particular segment called omnichannel, which is experiencing some of the highest traffic today in India and China,” said Pravat Rath, vice president of the retail business group at Tech Mahindra. The omnichannel segment is the consolidation of the various ways through which people can shop, with the underlying idea about creating a seamless shopping experience for customers, irrespective of where they buy from – be it on the desktop, smartphone, or even a retail storefront.
Rath further pointed towards the importance of having a central cross-country tax system, rather than a federal structure with individual states fixing different tax structures to suit their local economies. The Indian government made a landmark change to the disparate tax structures by creating a single ‘Goods and Services Tax’ (GST), which has now aligned the economy better and made it easier for e-commerce businesses to fix product prices evenly across the country.
In India, a National Logistics Policy (NLP) has been in the pipeline for several years now, with India’s Union Minister of Commerce, Piyush Goyal, reviewing the NLP draft last week and proposing to get the ministries of railways, road, shipping and aviation to work together to reduce the overall logistics costs across India. Currently, logistics cost around 14 percent of India’s GDP, with the government looking to bring it down to 9 percent.
“I believe a lot needs to be done at a policy level to address this situation. India needs proper infrastructure – a multimodal network that helps in faster movement of goods and services. A true multimodal network does not exist in India, and even if it does, it only remains in the corridors where there are railway lines and does not extend beyond that,” said Rath. “Creating multimodal hubs that connect roadways, railways, ports and airports, and to some extent inland waterways is critical.”
Rath contended that along with infrastructure, India needs to put a lot of thought into improving its mapping technology. “If you see in the U.S., the freight forwarders like UPS or FedEx have their entire distribution network dependant on map inputs to a great extent. HERE Maps and Google Maps have contributed significantly to improving last-mile delivery. The Uberization of food and other on-demand last-mile deliveries are all based on maps. I think India is lagging behind in mapping technology, and it has to be improved,” he said.
Lakshmanan Chidambaram, president of Americas strategic verticals in Tech Mahindra, interjected to explain that India is in the midst of a digital revolution, and that is helping to qualitatively improve the way logistics is done in the country.
“Within the Uberization concept, I’ve seen entrepreneurs working in parallel on models where if a truck deposits freight in a remote area and is coming back half empty, the trucking company managers now have access to technology that can help them operate their space more profitably,” said Chidambaram. “Then we have the farm-to-fork tracking possibilities. If you’re shipping bananas from Sri Lanka to India, you can have sensors that measure temperature and other conditions while the cargo is in transit. This can ascertain quality, and if in the event of something failing, the journey can be terminated to save costs.”
Being a price-sensitive market, businesses in India will embrace technology instantaneously if it can deliver cost savings and improve operational efficiency. “Digitization has made it easy to mount a project at minimal cost, measure efficiency and savings effectively, and scale it up successfully to a larger framework,” said Chidambaram. “We’ve seen innovations coming from the developed countries and going to the developing countries, but soon, we will see many innovations going the other way.”