Logistics

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This industry will be worth $215 billion by 2020-2021. Recording a 10% CAGR over its approximate size of $160 billion in 2016-17.

Fast paced manufacturing, retail, fast-moving consumer goods, and e-commerce sectors are the main reasons for growth. Moreover, dedicated freight corridors, logistics parks, free trade warehousing zones development in terms of infrastructure for logistics will improve efficiency.

At present, the logistics sector is dominated by transportation, which has over 85 percent share in value terms. Its share will remain high for the next few years. Storage accounts for the remaining 15 percent share. The sector is employment intensive, absorbing 22 million people.

Finally, smart grid connecting transport systems reducing energy consumption by aircraft, rails, mass transit, and automobiles are the fast-growing part of the industry. Day by day there are advancements in technology, for example, high-speed rail systems and high-speed aircraft are being built in several countries. Electric cars are hitting the highways in steadily increasing numbers.

Subcategories of Transportation: Air Transport, Freight, Logistics & Shipping, Maritime, Public Transport, Railway, Road Transport.

Challenges

Infrastructure is the major challenge that has cramped the growth of the logistics industry
Skill Development - India has a demographic advantage but the availability of appropriately skilled manpower remains a challenge
Information Technology - Firstly, a big constraint has been the slow adoption of new technologies. Moreover, awareness about the economic benefits of using digital technology is low and collaboration among stakeholders far from satisfactory
Regulatory Hurdles - The introduction of GST could change the contours of the logistics sector completely but such disruptive reform requires proper implementation.
Performance Standards - With a diverse customer base, consumer behaviors and expectations are also diverse. This includes both individuals, as well as corporate customers, demand personalized services, flexibility, and faster services.

Key Drivers

The logistics industry is a booming sector and the factors responsible are:

Firstly, the growth is two-sided; both the demand and supply are increasing. The economic recovery and benefits from the implementation of GST strengthen the demand let growth. Secondly, according to the rating agency ICRA, post-GST implementation the savings in terms of truck turnaround time has been approximately 18-20 percent.

Also, the outsourcing of non-core activities like warehousing and associated activities to integrated players is leading to strengthening the organized players, which in turn is good for the industry in the long term. The picking of industrial consumption is another driver on the demand-led growth of the logistics industry in India.

Furthermore, improvement in logistics infrastructure, integrated logistics, and the birth of numerous logistics start-ups, especially tech led start-ups are some supply-led growth drivers. Startups that are tech-enabled have a great opportunity right now to lead the growth of the industry. They are not only attracting heavy investments but also making the export procedures hassle-free, thus reducing the overall delivery time required.

Trends

Delhi-NCR, Mumbai & Bangalore dominated the warehousing space demand with 50% share
Smaller cities have been on the growth spurt too such as Hyderabad, Chennai, Kolkata, and Pune.
Another trend is the preference of a large warehouse that allows better automation processes. The market for warehouse automation is growing by 10-12 percent.

Way Forward

The Logistics Industry of the country will grow at a fast rate in the near future according to CRISIL. The research firm suggests the logistics industry of India which stood at Rs 6.4 trillion in FY17 will grow at a CAGR of 13 percent over the next three years and will be at Rs 9.2 trillion by FY20.

The government of India is also taking important steps to support the sector and boost its growth in the times to come. The commerce and industry ministry has decided to give one-time funding of Rs 8 million to the sector for building up initial infrastructure and phase-wise support of Rs 33.9 million for four years.

Finally, Big Data Analytics, Internet of things, Automation Technology, Cloud Computing, Blockchain Technology are some of the digital technologies that are widely transforming the logistics & supply chain industry today.