The recent years have seen a surge in the deployment of ICT infrastructure among enterprises in the logistics space. The industry is gradually moving towards new-age technologies such as the internet of things (IoT), artificial intelligence (AI), augmented reality (AR), automation and blockchain, which are set to disrupt the sector. These technologies are revolutionising the logistics sector and are predicted to be the harbingers of growth as they would streamline supply chains, operations and warehouse management, leading to higher efficiency and productivity.
A look at the key technology and growth trends in the logistics space, the challenges and the way forward…
Enterprises across the logistics sector are increasingly deploying solutions such as RFID tags, GPS and specialised sensors to carry out real-time tracking of shipments and consignments. These solutions are enabling organisations to detect any potential service level agreement (SLA) or turn around time (TAT) breach early on and take actions accordingly. In fact, the adoption of IoT-based tracking solutions is enabling logistics players to fast-track their shipments. For instance, by deploying solutions such as geofencing, geotagging, and proximity alert, logistics players can inform their warehouses of any approaching shipment. This essentially gives enough time to the warehouse staff to prepare for subsequent transit of shipment, thereby reducing any time lags in stopovers.
Blockchain making networks transparent
At present, challenges pertaining to documentation and information verification of shipments continue to plague the sector. The biggest bottlenecks are faced in the areas of procurement, transportation management, order tracking, and customs collaboration. Blockchain can effectively address these challenges by providing a shared database that runs on a distributed and decentralised ledger. This enables all the parties involved to access data pertaining to the shipment; this data was earlier kept and stored in silos.
Other use cases of the technology are product authentication and shipment tracking. By deploying blockchain-based track and trace solutions, carriers can ensure supply chain integrity. This is particularly helpful in the case of high-value shipments for which traceability of each and every move is required. Moreover, the deployment of blockchain-based software and solutions allows carriers to swiftly identify counterfeit products and the point of their origin. Although still at a nascent stage, blockchain-based solutions provide great value and are, therefore, garnering increased interest among logistics players in India.
Of late, companies in the logistics sector have started deploying AI to automate repetitive and mundane tasks, and streamline warehouse and supply chain management. The use of AI-enabled robotics is gaining traction among logistics players for carrying out tasks such as picking and packing of shipments, and loading and unloading them. AI is helping carriers in bringing down labour costs dramatically, enhancing transparency in operations, decreasing turnaround time, increasing throughput, eliminating SLA or TAT breaches, and improving processes, thereby ensuring better customer experience. In addition, AI-based solutions across the supply chain enable logistics companies to gather insights from the data collated. This, in turn, allows them to carry out damage control even before the crisis and make modifications if required. Such insights can be related to tracking, back-end operations, and inbound and outbound functions, among others.
Self-driving trucks, autonomous ships, and drones are gradually gaining popularity in the logistics sector, as they help cut down labour costs and expedite the delivery process. In fact, various global players have already started deploying these solutions. For instance, Amazon Logistics has been exploring new technologies such as delivery bots and drones to cut down labour costs and expedite the delivery process.
Industry analysts predict that it won’t be long before India starts deploying these autonomous transport solutions. In fact, India has already approved a regulation for drones, and related frameworks for other use cases are also in the works. These technologies can potentially transform the conventional logistics market by delivering products faster, more efficiently and in a cheaper way. Moreover, these solutions are far more environment friendly than traditional trucks.
According to a recent market report, autonomous transport solutions can help carriers save around 20 per cent of the fuel costs by supporting transportation, warehousing operations and last-mile deliveries. Further, as per the industry, they can potentially revolutionise the way high-priority goods such as medical sup- plies and foods are delivered.
Growing digital logistics market
Recent times have seen a surge in the amount of investment being made in the logistics sector, especially digital logistics. Investors believe innovative B2B logistics start-ups employing cutting-edge technologies, such as robotics, automation, data analytics and IoT, have the potential to significantly disrupt the logistics market. As such young start-ups in this space have been attracting significant amount of funds to support expansion. For instance, earlier, in 2019, logistics start-ups Blackbuck and Locus had raised $70 million and $22 million respectively.
With respect to supply chain management also, a lot of start-ups have sprung up and are providing real-time freight booking and pricing services. These companies are providing an alternative to the traditional brokerage process of making freight booking, as they offer services that are more efficient and cost-effective than the conventional ones. With the help of these services and apps, shippers can get information on the available trucks and nearby third-party logistics providers, and make the booking through the app itself, thus eliminating the arduous process of first finding a truck and then negotiating a deal with the truck owner. In addition, the freight capacity can be easily assessed using these apps and services. The freight management services provided by these apps are safer and more secure than the conventional mediums. Therefore, by enabling faster movement and ensuring more efficiency, these apps and services help in conserving both time and energy, which are usually wasted in the booking process.
Given the growing digital trend in the logistics space, market reports suggest that start-ups in this sector have grown at a compound annual growth rate (CAGR) of 40 per cent in the past one year. At present, the share of start-ups in the overall organised players’ market is around 72 per cent. These young technology-driven companies are growing on the back of efficient and less resource intensive delivery processes. One such start-up success story in the logistics space has been of Delhivery, which recently became the first Indian logistics provider to be awarded a unicorn status.
Challenges and the way forward
Despite technological advancements, challenges in supply chain management continue to affect the sector. This is because of lower awareness about monetary benefits of digital technology. Traditional players continue to be apprehensive about deploying new cutting-edge technologies owing to their preconceived notions about these technologies being expensive or not being fit for the Indian market. Moreover, even among the players who have started taking the digital route, there is minimal to negligible collaboration. Also, despite the number of logistics startups growing, the space is still dominated by players such as Blue Dart and Gati. Owing to their traditional way of operating, these companies face challenges such as minimal transparency of fleet movement, low optimisation of routes, fuel wastage, vehicle breakdown, poor vehicle maintenance, the inability to track goods’ movement/delivery, driver retention and failure to employ actionable intel to make smart business decisions.
In addition, various other challenges such as poor infrastructure, inadequate road connectivity and regulatory hurdles continue to impede sector growth. Also, individual truckers continue to dominate the space, which poses a challenge to the expansion and development of the larger digital logistics sector.
Challenges notwithstanding, digitalising the logistics sector offers immense opportunities for all the industry stakeholders. According to the Associated Chambers of Commerce, India can save over $50 billion if the cost of logistics and transportation is reduced from around 14.4 per cent of GDP to 9 per cent of GDP. India’s spend on the logistics sector is far more than what other developing countries are incurring, which is less than 8 per cent of their GDP. Thus, India needs to significantly reduce its spend on the logistics sector and the deployment of digital solutions is the only way to achieve this. Therefore, it is imperative for the government to create a favorable regulatory framework for technology adoption, and facilitating collaboration among industry players.
By Diksha Sharma