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Competitive Advantage: Logistics enterprises opt for emerging technologies for rapid growth

March 29, 2016
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The growth in India’s logistics industry is closely associated with the pace of its economic development. Logistics forms the backbone of trade and is critical for its growth. According to a study conducted by the Confederation of Indian Industry, the country’s logistics sector is expected to be valued at $200 billion by 2020, driven mainly by an increase in consumer demand (particularly in Tier II and Tier III cities), the rise in the e-commerce industry and mega infrastructure projects announced by the government.

Logistics involves transportation, warehousing, cargo consolidation and express cargo delivery. Given the critical nature of the industry, it is essential that the logistics value chain is efficient in order to achieve both time and cost savings. As per a report by McKinsey, inefficiencies in logistics infrastructure cost the Indian economy an extra $45 billion every year. With the aim of bringing down the high costs and inefficiencies in the logistics chain, enterprises are increasingly opting for advanced technologies.

Logistics enterprises are beginning to make significant investments in revamping their legacy telecom and IT set-up to bring in greater operational efficiencies. Such investments are not only helping them modernise key services like warehousing, freight forwarding, express cargo delivery, and container and shipping services, but also gain intelligence for analysing business information more effectively and taking informed decisions. In fact, the deployment of the latest technologies is helping companies restructure their distribution set-up to achieve higher service levels, and lower inventory and supply chain costs.

A look at the key technology trends in the logistics industry…

Basic network requirement

Logistics enterprises have established robust telecom networks using a mix of wireless and wireline technologies to meet their daily communications requirements. The majority of these enterprises have set up wide area network (WAN)-based systems, comprising multiprotocol label switching, leased lines, integrated services for digital network, Ethernet and virtual private networks to support their day-to-day connectivity needs.

A few large-scale logistics companies have also deployed IP technology to reduce network-related expenses. Further, in order to achieve last mile connectivity, they have opted for optical fibre cable as it offers huge bandwidth capacity and high speed broadband connectivity.

Enterprise and mobility applications

Apart from having a robust communications set-up in place, nearly all logistics companies have deployed enterprise resource planning (ERP) systems, which form the core of their IT infrastructure. ERP systems help enterprises capture huge volumes of data for processing information related to financials, inventory and customer orders. In addition, applications such as customer relationship management (CRM) and supply chain management (SCM) form a critical part of their overall IT requirements. Although traditionally CRM has been used by enterprises to maintain their relationship with customers, the application is now instrumental in involving the customer as an active participant.

Given the widespread presence of the logistics chain, these enterprises have been among the first to adopt mobility applications. Communication between enterprises and customers is fast taking the digital route. Business communication has shifted to mobile devices and the internet, with web-based systems gaining increasing popularity. This shift has been driven by the fact that all employees of an enterprise do not necessarily have access to the same hardware, neither do they work at the same location. In such a scenario, systems hosted on business VoIP and cloud-based email servers are better options as they require web browsers, which can be accessed on different devices.

In addition, enterprises have adopted mobility solutions for their fleet of vehicles. For instance, many logistics enterprises now use radio-frequency identification (RFID) technology to track cargo containers. RFID can better automate the counting and tracking processes that are required for faster and more accurate supply chain logistics. In fact, some industry analysts are of the view that using RFID can help enterprises achieve almost 100 per cent accuracy in shipping, receiving and order placement; 99.5 per cent inventory accuracy; 30 per cent faster order processing; and 30 per cent reduction in labour costs.

SCM is another key application that is helping enterprises streamline their business processes and bring in greater efficiency. Together with ERP and point-of-sale applications, SCM can help keep track of inventory and product locations. In fact, these applications are rapidly substituting the traditional means of communications like phone calls and SMSs.

Adoption of cloud solutions

Cloud adoption is gaining traction across all industry verticals, including logistics. Logistics enterprises now depend heavily on enterprise and mobility applications. These applications are being increasingly delivered through the cloud. With cloud systems being adopted across the breadth of the supply chain, using solutions such as XML and electronic data interchange, shippers and carriers are able to connect over web-based scheduling services in a shorter time span.

Moreover, companies are able to access any information as and when required, and collaborate freely across companies and geographies. Further, working across interoperable and cloud-based networks ensures that real-time changes and updates are available immediately. A logistics company can analyse and respond to the latest information on routes, schedules, rates, regulatory rules and other details almost immediately and take informed decisions. The biggest advantage that cloud-based applications offer is that these companies no longer have to devote time and resources in building cumbersome, stand-alone systems. Instead, they can focus on their core competencies and leverage applications from technology providers for capabilities outside their area of expertise.

Cloud adoption in the logistics sector has picked up pace due to the emergence of hyper-local delivery start-ups. These enterprises thrive on technology since they operate mostly as online platforms. Moreover, the logistics chain is being redefined by this new subsegment. In order to maintain competitiveness and cost efficiency, logistics enterprises are expected to adopt cloud technology in a big way.

In spite of the obvious benefits, security, data management and integration concerns act as key deterrents to cloud adoption. Most cloud systems leverage different interfaces to access data and each cloud vendor has a different approach towards data storage and access. To ensure that logistics companies experience the benefits of cloud, vendors should move beyond merely delivering IT solutions at a lower cost and start delivering concrete business benefits.

Data analytics

The logistics industry generates a huge amount of data on a daily basis, which can be cumbersome to maintain and analyse. For millions of shipments every day, their origin, destination, size, weight, content and location also need to be tracked across the global delivery networks. However, these enterprises have not been able to derive much value from the voluminous data. The sector is better positioned to benefit from technological advancements such as big data analytics. Some logistics enterprises are leveraging the power of data analytics to optimise their  delivery time, resource utilisation and geographical coverage. However, the uptake of this solution is still very limited in the Indian logistics market. Therefore,  logistics companies need to be made aware of the subsequent benefits of the same.

The way forward

Enterprises explore different opportunities to capture a larger market share. To this end, the implementation of technology can prove to be one of the strongest tools for any enterprise to drive its growth. Logistics companies particularly can gain immensely from the incorporation of IT and communications technologies. These not only help in bringing in greater efficiencies but also in reducing the costs incurred to meet the growing customer demand. There is still huge room for improving operational efficiency and streamlining business operations to deliver better customer experience. With the emergence of young online logistics enterprises, which are increasingly looking at deploying advanced IT infrastructure to enable customer acquisition and boost growth, it will become necessary for traditional enterprises to adopt IT in a big way to retain their market positions.

The Indian logistics market is poised to grow given that the country has a fast expanding economy. To ensure that the logistics industry is ready to meet the growing demand, it would need to be cost-effective and improve its operational efficiencies. This can be made possible by the increased adoption of recent technologies.

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