Logistics companies play an essential role in supply chains from every sector, and they’re a major factor in forming positive relationships between businesses and their customers by delivering products on time. In India, the logistics sector has made quite a name for itself over the past few decades. A recent study conducted by the India Brand Equity Foundation (IBEF) forecasted that the yearly investments in the Indian logistics sector would reach $500 billion by 2025. Another survey, conducted by Research and Markets, predicted that the logistics market in India could see a CAGR of 10.5% between the years 2019 and 2025.
However, while this is all good news, there are certain challenges that the Indian logistics industry faces, such as transportation, skill sets, and strict standards. Additionally, the COVID-19 pandemic has had a significant impact on the logistics industry over the past year. Overcoming these challenges could greatly improve the conditions and growth rates that the logistics industry is currently seeing.
This is where the National Logistics Policy (NLP) will hopefully make a difference. NLP is a government-initiated policy with the main purpose of improving the movement of goods all over the country. The policy is currently still under development, but from the parts that have been released, we can piece together the issues that NLP will impact. Here are the challenges faced by the logistics industry that NLP is designed to help.
Poor transportation infrastructure
There are four main modes of cargo transportation: roads, railway, coastal shipping, and airways. As of 2017, 67% of cargo traffic was moved on the roads, making it the most popular method of transportation. The problem with this, though, is that road transportation isn’t the most reliable and there are several factors that can cause delayed deliveries. Because road transport is so common these days, there’s a lot of congestion. There’s also the problem of roads in suburban areas that are underdeveloped and difficult to travel on. Because of this, several alternative solutions have been identified.
Coastal shipping is an alternative that’s good for the environment. It’s also comparatively cheaper: coastal shipping costs about INR 0.15-0.2 per tonne-km, whereas transport by roads costs around INR 2.5 per tonne-km. According to the Western India Regional Council, this one change could save the logistics industry INR 21,000-27,000 crore by 2025.
Since India is the second largest fruit producer and third largest vegetable producer in the world, the government is considering teaming with the Ministry of Food Processing Industry to promote developments in cold chain logistics to specifically deal with perishable goods.
There are also plans to add government-owned demand and fulfilment centres at strategic locations, to follow in the footsteps of existing commerce giants like Amazon and Flipkart. This will increase available storage and manufacturing spaces and reduce the time taken for transportation.
One of the biggest challenges that the logistics industry faces is the lack of skilled labourers. In March 2019, it was estimated that only 4.69% of the manpower employed in the logistics industry was properly skilled, and the remaining portion consisted of those who were only partially skilled or completely unskilled.
The logistics industry requires all sorts of manpower, with varying degrees of skills. While certain tasks do not need to be completed by trained staff, others do. This staff must include managers to oversee major processes, supervisors to perform quality checks, and trained professionals for each mode of transport (road, railways, airways, and coastal shipping). These are the types of professionals who could improve this industry, but subpar working conditions and low salaries have made the logistics industry an unappealing place for professionals who possess these skills. This means that the industry is reduced to taking in whatever manpower they can get, regardless of whether or not they’re trained.
The government recognises the severity of this issue, and is considering options for developing these partially skilled and unskilled employees, such as providing rigorous training sessions and offering better pay. Additionally, it proposes to use more technology and automation to improve the efficiency and speed of processes.
Bharat Stage Emission Standards
The national logistics policy also focuses on the importance of switching to more environmentally friendly modes of transportation like greener fuels, and creating new standards and regulations to monitor emissions, wastes, and noise. The Bharat Stage Emission Standards (BSES) are an example of one such initiative. These standards were put together by the Indian government to monitor the output of air pollutants coming from engine equipment, which includes vehicles. Till date, there are a total of six standards under BSES, numbered up to BS VI. BS VI was implemented on 1 April, 2020 and was made mandatory for all vehicle dealers across the nation. This new implementation brings a few changes with it, such as:
BS VI vehicles use a special, ultra low sulphur fuel (ULSF), which has sulphur levels below 10 ppm. Since this requirement is new, there aren’t many refineries in India that make this type of fuel, so existing refineries may have to begin making it themselves. This may require costly new equipment.
The extra manufacturing effort that this fuel requires will most likely result in a higher cost of fuel; ULSF is expected to cost more than the existing prices for petrol and diesel.
Although these new changes may require a bigger budget to implement, the NLP is designed around the end outcome, which is to reduce the carbon footprint of supply chains working with the logistics industry.
The Indian logistics industry has been gradually yet steadily growing over the past few decades, and it’s only going forward from here. While the present results and the expected results are both positive, there’s always room for improvement, as with most things. In the case of the logistics industry, these improvements will mean overcoming their biggest challenges: transportation, available skill sets, and environmental regulations. Working on these issues will help simplify processes for businesses in the logistics industry. Since the NLP is intended to bring about positive changes in all of these factors, it seems like a good step forward.