India spends nearly 13% of its GDP on logistics whereas the US spends 8% and Europe about 9%. Due to the pandemic leading to a low-touch economy, we are seeing a massive move towards digitization and remote monitoring in the logistics sector all across the globe. Considering the competitive nature of the logistics industry and the vision to make India a global manufacturing hub, the country’s logistics sector also needs to undergo a full-fledged digital transformation. By using cutting-edge technologies such as AI, IoT, Big Data and so on there is ample scope for value creation in the transportation arena. There are numerous benefits that digitization offers such as effective route planning, smart capacity optimization, interconnectivity with various other aspects of the transportation ecosystem such as shippers and warehouses, as well as improving safety and customer experience etc.
Let’s take a look at some of the major challenges faced by the logistics sector today and how technology can help in resolving those.
Unorganized nature of operations: It is estimated that there are about 12 million trucks of different sizes and types in India, and almost 90% of the vehicles are owned with small operators owning less than 5 vehicles. Majority of them are in Tier II, Tier III and smaller towns across the country which makes it difficult for them to invest heavily in digital operations. However, there has been an emergence of logistics marketplace platforms in the country in recent years that offer transformational benefits for these small-scale operators. They can establish an online presence, use various cloud-based tools to optimize and monitor their operations, generate business digitally and also adhere to compliances without requiring any kind of investment in hardware or proprietary technology building.
Trust deficit: Trucking in India is a highly personalized and localized business. The lack of digitization and small-scale dominance has resulted in truckers and shippers doing business within their direct circles. This has created an ecosystem of numerous middlemen and agents. An average trucker would have to rely on the handful of agents he knows for the next load. Those agents in turn would rely on the few shippers they directly work with. Consequently, there is usually a much longer delay between a vehicle procuring new loads, and on an average a truck is not even on road for 20 days in a month.
By leveraging the services of a marketplace platform with lakhs of trucks as well as shippers on the same platform, it would become much easier for any service provider to quickly find the next consignment. The existing users of such platforms are able to keep their vehicles on roads for as long as 25 days or even more, thus, generating significantly higher revenue than before. The shippers and transporters are all verified by the platform, leading to greater accountability. There is complete end-to-end visibility of the entire operation and all stakeholders can be in the know of the vehicle/goods status on a real-time basis without needing to make a lot of phone calls.
Resource Optimization: Inefficiency of resources is the biggest reason for the unusually high cost of logistics operations. It is usual for trucks to return empty to the base after delivering a consignment or operating partly loaded/half-full. Even the productivity per vehicle is very low in India. A truck usually travels an average of 300 km a day in India compared to the global average of 500 to 800 km a day. With technology, there can be smart load-to-vehicle match and space optimization that eliminates the likelihood of trucks running empty or half-loaded. Further, integration of GPS with AI can lead to optimized route planning. Manual route planning is often erroneous and not guided by real-time status. Thus, trucks often get stranded in traffic jams and other such unforeseen scenarios leading to loss of time, fuel and productivity for the stakeholders.
This is the era of optimization through digital technologies. The small-scale transportation sector operators are mostly not capable of undergoing major digital transformation independently. This is where the selective adoption of affordable technologies as well as usage of trucking marketplaces heralds a great opportunity and this is where the future of logistics is going to be!
The article has been written by Karan Shaha, CEO and Co-Founder, Vahak