Revolutionizing The Logistics Industry Through Digitalization
Yogesh Dhingra, Founder, MD & CEO, Smartr Logistics, 0
In a conversation with Bimlesh Prasad, Correspondent, CEOInsights, Yogesh discussed about how digitalization would revolutionize the logistics sector. Additionally, he talked about the Govt. initiatives and future of logistics markets.
Could you shed light on the current scenario of the logistics sector, and which are the trends that intensified and emerged? How are digital tools adding value at each stage of the logistics journey?
The Indian logistics sector is currently undergoing a period of rapid transformation and growth, which has brought in a mix of high-risk as well as opportunities for the industry players. The government's initiatives to promote digitalization have helped streamline processes and reduce paperwork. Moreover, new technologies such as IoT-enabled solutions are being adopted across the country to improve visibility, optimize operations, enhance customer experience, and ensure safety standards for goods in transit. With the rapid growth of e-commerce in India, logistics companies are increasingly focusing on providing specialized services for the e-commerce industry, such as last-mile delivery and reverse logistics.
The introduction of Open Network for Digital Commerce (ONDC) and Electronic Data Interchange (EDI) is playing a key role in revolutionizing the logistics sector. Software solutions like Warehouse Management Systems (WMS), Transport Management System (TMS), Order Management System (OMS), and API integrations between stakeholders have made the process more efficient, and cost-effective, and allowed for smoother operations. Additionally, the introduction of the GST E-way bill system has supported a seamless journey within the sector in India.
Features such as end-to-end and real-time tracking tools help in optimizing the last-mile delivery operations, and status of goods in transit, reducing delivery times and improving customer satisfaction while providing them with greater visibility and transparency. Furthermore, BI tools, data management and visualization dashboards are allowing for more predictive analytics to ensure better performance and customer satisfaction.
What is your perception about the latest budget helping to position the industry to be on a competitive edge on the global market?
The government is taking vital steps to accommodate the rapidly growing logistics landscape in the country. In the Union Budget 2023, this was reflected in various reforms and allocation for flexible policies and better infrastructure. As a budding logistics company, we support the government’s aim to reduce the overall logistics cost from a double-digit to a single-digit number. We are also aligned with their vision to increase infrastructure development and the multiplier effect this has on productive capacity and creating growth and employment opportunities in the country, making India a global logistical hotspot.
To further build upon the strategic framework, the Budget proposed a 33 percent hike in capital investment including provisions to construct new airports and expand railways, as well as, incentivizing private investments in infrastructure. This will effectively ensure better connectivity, increasing capacity, and better productivity for the system thereby reducing overall logistics costs.
We were pleased to see capital allocation highlighted for critical transport infrastructure projects for last and first-mile connectivity. Moreover, provisions towards the use of electric vehicles will help promote more sustainable operations.
Since its inception, Smartr has emphasized cost reduction, aspiring to break the myth that quality services come at a high cost. This was reiterated in the newly launched National Logistics Policy which focuses on reducing logistics costs and developing a dynamic multi-model, cross-sectoral and technology-enabled logistics industry. This year’s Budget met our expectations, and we are confident that it will be conducive to robust growth and development of the sector, reducing overall costs, increasing productivity, and positively contributing to the economy.
How is the industry reorienting its strategies to meet the demands within and outside the country, on the same? How is it helping manage transportation costs?
To transform India into an attractive logistical hub, the government launched various initiatives to boost the sector digitally as well as with physical infrastructure enhancements. E.g., a portal to decentralize the e-commerce industry, Open Network for Digital Commerce (ONDC) was recently introduced to offer equal opportunities to small& medium businesses. Apart from that, the National Logistics Policy was a crucial move to streamline the sector and grow its potential. Under this policy, many reforms and roadblocks were addressed. It also included the PM Gati Shakti scheme which aims to grow multi-modal connectivity as well as the UDAAN scheme which entails improving regional connectivity via airports and the Sagarmala initiative to improve ports/waterways.
This year’s budget contributed further by accommodating provisions for the railways – the highest
it has ever been and developed of dedicated freight corridors. This is a welcomed move to increase overall freight capacity and allow for more efficient connectivity options. To realize the goal of becoming a global manufacturing hub, the government is now working towards building infrastructure to promote flexibility and better connectivity across the country. Eg: Rail, being one of the most efficient modes of transportation, will help in reducing cost reduction as well as reducing greenhouse emissions by decreasing reliance on road and air connectivity only.It also highlighted enhanced regional air connectivity through additional airports and heliports which is imperative to connect a larger share of the population to faster connectivity through direct flights for travel as well as cargo movement thereby bridging the distance gap and bringing them closer. Furthermore, highways have been developed in recent years which greatly reduce time and fuel consumption thereby benefiting from both a cost and efficient connectivity perspective.
Through the establishment of the Urban Infrastructure Development Fund (UIDF), the government emphasizes development in Tier 2 and 3 cities. We highly support this initiative as these cities have become major consumption centers for demand as well as producing manufacturing output in recent years with increased digitization. Hence better infrastructure is increasingly critical to support these population centers.
How has this influenced investor sentiment?
After the global lock-down, the potential of logistics and last-mile delivery emerged as a sunrise sector that has immense potential of becoming a lucrative industry. This led to several initiatives being implemented due to the influx of huge investments to transform and truly leverage the benefits offered by the sector.
Major institutional investors are keen to tap into this opportunity, waiting for the right, well-versed candidates to invest in to tap into this critical industry which is experiencing unprecedented growth. Currently, a major portion of the total addressable market size is with unorganized players and moving forward we expect more market share to be gained by organized players as well as huge growth in this sector with CAGRs of 25 percent plus for the domestic ground express market.
In addition to key policies and technological interventions, the government introduced the Infrastructure Finance Secretariat which will provide broader access to private funds and incentivize infrastructure development benefiting all stakeholders within the manufacturing and logistics ecosystem.
Where do you see the industry heading towards the upcoming years? What are the kinds of developments that could take place in your opinion?
In the coming years, the logistics industry will continue to confront immense changes. Due to the ever-rising customer expectation of getting good, faster, more flexibility at a low or even no-delivery cost is expected to further increase the pressure on the logistics sector. However, with the help of technologies like artificial intelligence (AI), cloud, automation, robotics, blockchain, and big data, the industry is sure to adapt to these challenges and changing consumer patterns.
As the Indian government is investing extensively in logistics infrastructure development, improved connectivity and lower transportation costs are predicted. With that, we expect to see an increase in third-party logistics companies, with a strong emphasis on improving last-mile delivery. Rise of e-commerce and customers' growing need to receive things in the quickest possible time, last-mile delivery has become an essential component of the logistics business. Companies will also invest in technology solutions and alternative delivery techniques to increase last-mile delivery efficiency.
The Indian logistics space would witness a spike in mergers and acquisitions in the coming years. As such, many firms are looking to consolidate their operations by merging with or acquiring other players to increase market share and gain access to new technology capabilities. This trend will continue well into the future as Indian businesses strive for greater efficiency and offer end-to-end logistics capabilities for clients.
Lastly, initiatives to combat CO2 emissions will be a priority, as according to studies the logistics industry is expected to become the highest CO2 emitting sector by 2050. Hence, efforts will be made by the govt as well as private players to adopt environmentally friendly practices such as using electric vehicles and optimizing delivery routes to reduce emissions. Several initiatives such as tax subsidies and road tax waivers as well as enhanced infrastructure will be further promoted by the Indian govt. to penetrate EVs in the sector.
What is your word of advice to industry leaders while hacking new opportunities?
Innovation and disruption are key to success. As industry leaders, it is important to stay ahead of the curve and anticipate changes in the market to be relevant and capitalize on emerging trends.Let’s take the tablet for example, it was a product that had never been conceived by the consumer as something they might need, and it created an entirely new product category for itself. To truly make an impact, you must either create a product or service that no one has imagined yet or build a solution to a critical problem that no one has solved yet. In some cases, maybe it's both. The world around us has countless such opportunities, pick something you are passionate about building or solving and make that purpose your identity.
It's also important to invest in your people, as they are often your best resource for finding innovative solutions. Embrace technology and invest in training and development to ensure that your team has the skills necessary to pursue new opportunities with confidence and success.
Through the establishment of the Urban Infrastructure Development Fund (UIDF), the government emphasizes development in Tier 2 and 3 cities. We highly support this initiative as these cities have become major consumption centers for demand as well as producing manufacturing output in recent years with increased digitization. Hence better infrastructure is increasingly critical to support these population centers.
How has this influenced investor sentiment?
After the global lock-down, the potential of logistics and last-mile delivery emerged as a sunrise sector that has immense potential of becoming a lucrative industry. This led to several initiatives being implemented due to the influx of huge investments to transform and truly leverage the benefits offered by the sector.
To truly make an impact, you must either create a product or service that no one has imagined yet or build a solution to a critical problem that no one has solved yet.
Major institutional investors are keen to tap into this opportunity, waiting for the right, well-versed candidates to invest in to tap into this critical industry which is experiencing unprecedented growth. Currently, a major portion of the total addressable market size is with unorganized players and moving forward we expect more market share to be gained by organized players as well as huge growth in this sector with CAGRs of 25 percent plus for the domestic ground express market.
In addition to key policies and technological interventions, the government introduced the Infrastructure Finance Secretariat which will provide broader access to private funds and incentivize infrastructure development benefiting all stakeholders within the manufacturing and logistics ecosystem.
Where do you see the industry heading towards the upcoming years? What are the kinds of developments that could take place in your opinion?
In the coming years, the logistics industry will continue to confront immense changes. Due to the ever-rising customer expectation of getting good, faster, more flexibility at a low or even no-delivery cost is expected to further increase the pressure on the logistics sector. However, with the help of technologies like artificial intelligence (AI), cloud, automation, robotics, blockchain, and big data, the industry is sure to adapt to these challenges and changing consumer patterns.
As the Indian government is investing extensively in logistics infrastructure development, improved connectivity and lower transportation costs are predicted. With that, we expect to see an increase in third-party logistics companies, with a strong emphasis on improving last-mile delivery. Rise of e-commerce and customers' growing need to receive things in the quickest possible time, last-mile delivery has become an essential component of the logistics business. Companies will also invest in technology solutions and alternative delivery techniques to increase last-mile delivery efficiency.
The Indian logistics space would witness a spike in mergers and acquisitions in the coming years. As such, many firms are looking to consolidate their operations by merging with or acquiring other players to increase market share and gain access to new technology capabilities. This trend will continue well into the future as Indian businesses strive for greater efficiency and offer end-to-end logistics capabilities for clients.
Lastly, initiatives to combat CO2 emissions will be a priority, as according to studies the logistics industry is expected to become the highest CO2 emitting sector by 2050. Hence, efforts will be made by the govt as well as private players to adopt environmentally friendly practices such as using electric vehicles and optimizing delivery routes to reduce emissions. Several initiatives such as tax subsidies and road tax waivers as well as enhanced infrastructure will be further promoted by the Indian govt. to penetrate EVs in the sector.
What is your word of advice to industry leaders while hacking new opportunities?
Innovation and disruption are key to success. As industry leaders, it is important to stay ahead of the curve and anticipate changes in the market to be relevant and capitalize on emerging trends.Let’s take the tablet for example, it was a product that had never been conceived by the consumer as something they might need, and it created an entirely new product category for itself. To truly make an impact, you must either create a product or service that no one has imagined yet or build a solution to a critical problem that no one has solved yet. In some cases, maybe it's both. The world around us has countless such opportunities, pick something you are passionate about building or solving and make that purpose your identity.
It's also important to invest in your people, as they are often your best resource for finding innovative solutions. Embrace technology and invest in training and development to ensure that your team has the skills necessary to pursue new opportunities with confidence and success.