Covid-19 impact on Indian Logistics industry - A perspective

Logistics industry in India is estimated to be worth $215 billion growing at a CAGR of 10.5 per-cent. Yet only about 10-15 percent is believed to be owned by organized players. Rest of it has traditionally been fragmented & unorganized.

Having improved its ranking from 54th in 2016 to the 35th rank in 2018 in the logistics performance index; the Indian Logistics sector was trudging along smoothly till March 2020 when the Covid-19 pandemic hit & all of a sudden everything was at a standstill due to the lockdowns & restrictions.

However, the ensuing turmoil & chaos did not last very long for the dynamic Indian logistics industry through a lot of restructuring & realignment took place; it's also necessary to acknowledge that finally the pandemic acted as a catalyst for the growth of the Indian logistics industry.

Pre-pandemic era in India saw a lot of unorganised smaller players providing a plethora of services & at times beating the bigger players with their specialised services in their own niches; however, there were some inherent limitations –

· Lack of vision to grow beyond certain services in certain routes/regions· Inability to harness the available technology due to lack of investment, talent etc.

· Unable to create synergies & better customer services/experience etc.

· Dependence on the amply available cheap manpower

During the pandemic the logistics industry had a very critical role to play in terms of keeping the nation moving forward in spite of the various restrictions & lockdowns. This required a coordinated approach across various states & cities of India. Hence, we saw a big churn & many smaller logistics providers were simply not able to cope up with such demanding expectations; It was due to a lot of challenging factors including –

· Inability to adapt to the dynamic demands· Dependence on manual labour, which became scarce due to the migrations etc.

· Lack of technology use including digitalisation, GPS devices, online systems etc.

· Delayed payment cycles· Rising fuel prices

However, the organised providers had more cushion to absorb the downturn challenges during the early lock downs & once they had recovered from the initial shock, they quickly realised that the pandemic also provided them with several opportunities to grow & enhance their capabilities, some of these were –

·  Increased demand due to the exponential increase in e-commerce

·  Provisioning daily essentials, movement of medical equipment, protective gear etc.

·  Increased demand due to the vacuum left by smaller logistics providers

·  Push to refine their vision & digitise many business aspects e.g. operations, payments etc.

·  Relative simplification of operations with statutory implementations of GST, E-Waybill & IRN

·  Forward looking vision towards quick adoption of technological innovations like online meetings, Work from Home, AI/ML, IOT, GPS, Cloud infrastructure etc.

Many of these organised players have seen tremendous growth in throughput, revenues & of course profits over the last 18 months; it is mainly due to the rapid operations adaptability, technological adoption & quick decision making of these organisations.

This period has also seen the sharp rise of many start-ups which are leveraging the booming e-commerce sector. With the pandemic the focus shifted on providing the end consumer with a plethora of online convenience options & reduce the dependence on physical market visits. A large number of services/mobile apps materialized to cater to the need of contactless, speedy delivery of essential daily need items/services, protective gear, masks, sanitiser etc. These start-ups have also seen phenomenal growth & are bridging the gap in the fragmented unorganised sector. Moreover, they are technology savvy & are focused on providing the end consumer with visibility & control over the delivery of their orders/services. Hence, not only enhancing the customer experience but providing true custom-er delight & gaining their loyalty in return.

The Indian logistics sector provides livelihood to more than 22 million people. However, the logistics cost in India (as a percentage of GDP) is about 14 percent, which is quite high com-pared to the global target of around eight-10 percent. The bulk of logistics movement in India happens via surface transport Hence the rapid pace of infrastructure development especially road infrastructure (by official estimates over 36 kms of new roads are constructed every day) is surely a step in the right direction. This coupled with rapid adoption of innovative technologies is helping to reduce the transit times & increase the transported volumes hence contributing towards reducing the overall cost through the spiraling fuel costs & lack of trained manpower add to the constant pressure of increasing costs.

Despite such dynamics the future of logistics industry in India looks very bright since a large majority of overall pick-ups/deliveries are still conducted by the fragmented & unorganized players. We may witness large new investments in ware-housing space, huge mergers & acquisitions to create synergies in the near future.

With the focus back on the India growth story due to the imminent economic revival, expected National Logistics Policy implementation, Easy availability & adoption of the innovative technologies etc. the large untapped potential of the Indian Logistics industry is a very fertile ground for exceptional growth in the coming years & decades...