Transportation Industry in India and its Digital Prospects



Introduction

Transportation and Logistics industry is currently experiencing immense changes which brings risk and opportunities like most other changes. In order to keep businesses strong, many companies rely on transport and logistics. Logistics, being an integral part of any economy, companies today have started record keeping, which helps in improving the advances in technology. Logistics has brought several factors with it such as warehousing closer to large towns, thereby bringing in more employment opportunities in these locations.

The Indian transportation industry has over 7 million goods vehicles moving throughout the country. It is expected that the freight volume that has reached around 1325 billion ton-km, would double by 2025. India spends around 14% of the GDP in this sector, which is double than that of developed countries. Still the logistics industry remains one of the most unorganized and rough sectors.

To gain better understanding and deeper insights of the issues faced by this sector, it is extremely crucial to understand the day-to-day operations in the industry and the stakeholders.


Operations in the industry

Mandi or Spot Markets, plays an important role in Indian trucking industry for small and large players in order to fulfill the daily transportation requirements.

Key players in market includes -

Shipper - Shipper is a person who owns the goods, with a responsibility of shipping it from a location to the destination. There are times when the goods have multiple loading and unloading points. The person may be a retailer, manufacturer or a distributor or some firm like Patanjali which requires it goods to be moved on regular basis.

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Transporter - The work of transporter includes shipping the goods, placing the vehicles at loading point, ensuring the completion paperwork activities and payment of advance charges (around 85% and remaining on proof of delivery) to the vehicle suppliers in order to ship goods.

Broker - Broker heads the supply side and is a trusted person. Broker is important in order to re-route the vehicle back to its origin. If in case, something goes wrong with the vehicle during transit period, then the responsibility of broker includes replacement of vehicle and shipping of goods. Broker is an important person as the transporter or shipper cannot directly negotiate with fleet owners since they are not present locally.

Fleet owners -Being the vehicle owner, the primary goal of fleet owners is to ensure maximum utilization of vehicles. Fleet owners at times approach the transporter directly (with strict KYC by transporter) since the cost of unplaced vehicles needs to be taken by the fleet owners. They are heavily spread across India with 85% of fleets owned by people having less than 10 vehicles.

Since there are multiple activities take place in background by the time vehicle reaches in-transit hence assigning of load to a vehicle is not an easy process. Spot markets are time bound which leads to heavy price volatility.


Key Challenges faced by Logistics sector

* Due to restriction in connectivity, the performance lacks thereby hampering the development. Longer transit time is experienced due to poor infrastructure in India thereby increasing the cost per transaction.

* Lacking the integration of transport networks, information technology and distribution facilities.

* Different rules and regulations on logistics imposed by different states is a challenge for this sector. Different interstate permits, licenses add to the liability of the sector.

* Lack of efficient and trained manpower in the sector.


Importance of Logistics to Supply Chains

The implementation of seamless logistics is the key to maintain the pace with customer demands and outperforming competitors. Logistics can help in cutting of cost and time spent on moving goods from one point to another. Because the entire process is complex, ensuring of high value without an effective organized transport becomes impossible. It requires a lot of skills, special knowledge and product management in order to make the process look effortless.

Logistics are important because -

Positive business results through effective logistics- Logistics is used to plan and coordinate the movement of goods hence it forms a crucial part of supply chain

Businesses can create value via logistics - Logistics help in better availability of product to a wider group of people, hence businesses consider it as an important tool to create value for customers.

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Improvement in efficiency and cost reduction - By establishing partnerships with other businesses, the cost can be reduced. Efficiency of a business improves when firms start outsourcing of transport and warehousing combined with letting them take charge of shipping the goods.

Timely delivery of goods - Due to availability of professional logistics firms, businesses are able to carry on short time requirements more effectively which adds value to their offers and ensure timely delivery.

Satisfied customers (most precious asset) - Whether a business is big or small, it is always better to rely on effective logistics as they are the main drivers of supply chain.


Logistics 4.0


The effect of Industry 4.0 on the field of transport and logistics is described by Logistics 4.0. It includes automation through various companies and cross functional coordination tasks of logistics. Real time control of networks (logistics) can be performed through Logistics 4.0 with the help of technologies such as Internet of Things (IOT). This technology includes embedded systems - which are connected to each other via communication networks. Other components are autonomous intelligence systems, cameras, detectors and self-propelled cars.

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This system provides more transparency in supply and dispatch of materials thus enhancing the supply chain management capabilities. The goals of this system are to provide automation and optimization of material flows and the use of resources and as per experts, automation can increase productivity by 30%. Thus, through this technology, business models, processes and partner networks get flexible.

Logistics 4.0 is a technology which involves constant learning and adapting to new requirements; hence it is implemented continuously. The basis of Logistics 4.0 is on the implementation of forecast-based supply chain management, machine learning based pricing and artificial intelligence-based optimizations. These can be used to optimize the quality of services, flexibility of proposal, capability of delivery and supply security. In order to achieve this one must implement planning, controlling, monitoring and implementing details in Logistics 4.0.

By - Shivang Jitendra Khare

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