The industry is seeing driver shortages for delivery, says Zaiba Sarang, co-founder, iThink Logistics. It caused a lot more trouble during the festive season when the traffic load was really high. Logistics companies struggled to meet the expected delivery time, resulting in dissatisfied customers, says the co-founder of the Mumbai-based courier aggregation service.
Sarang says logistics is the nation’s most unorganised and fragmented sector. It needs to be streamlined in order to make the operations more effective and efficient.
Deepak Tiwari, COO of logistics and warehousing services provider KSH Logistics, says there is a rising demand for shipments. “But employment opportunities and driver retention is a huge problem in this industry.”
The logistics sector in the country urgently needs truck drivers, forklift operators, skilled manpower for warehousing and others to keep pace with the aspirations of a growing economy. With the budget around the corner, the stakeholders say the government has an opportunity to address these and other issues troubling the logistics sector, which forms the backbone of trade and commerce. Some experts also juxtapose the reports of unemployment that have been coming in with the need for better manpower management in logistics. There is an opportunity here for gainful employment and the budget can spell out the multiple tracks required to train, hire and retain staff in such a way that the sector can gain in the long run, they add. The challenge, however, is to get people to think of the logistics sector as a career opportunity and to make jobs in the sector appealing.
Stakeholders reiterate the need to streamline the sector.
Tiwari of KSH Logistics says the other challenges hurting the logistics sector are rising fuel prices. Road is the most common mode of transportation in India, especially because overcrowded rail networks, multiple handling and high rail tariffs make it difficult to use those services. “However, given the recent volatility in fuel prices, transportation costs have risen tremendously and are a big pinch for logistics companies.” Tiwari also points out the poor state of warehousing and its constrained locations. “The availability of quality manpower, high warehouse rentals, and higher interest rates on capital is a disincentive to create a large integrated warehousing space,” he says, adding that there is a need to smoothen the processes at various points in the sector.
Experts say the logistics cost as a percent of GDP is high in India and bringing this down can give the segment a big boost in terms of operations, employment and growth. The government has been saying that the logistics cost to GDP — which indicates the cost of transporting goods — should come down from about 16% to around 10% by 2024, making it more competitive with developed or comparable economies.
Talking about how the upcoming budget can help here, Tiwari says the government could address critical issues such as rising rental prices, fuel and transportation costs, fragmented communication, and infrastructure costs, which have significantly increased the operational costs of logistics service. “An incentive-based system should be in place. For example, people who build warehouses should get rewarded, and the tenant should get the space at a much lower cost per square foot. The government should also think about incentivising companies investing in automation, and incentivising warehouses that use such technologies,” he says.
The need to use more technology is not lost on any stakeholder in the sector. It makes most companies capable of taking on any global player. But the costs are high and may not be feasible for all kinds of companies. The budget could incentivise automation costs in logistics, they say, and this will encourage even the smaller players to become more tech-friendly.
Vivek Juneja, founder and MD of transportation and warehousing provider Varuna Group, says there is an urgent need for focussed spending on advanced technology. “We can expect budget 2023 to focus on India’s logistics ecosystem in becoming even more tech-savvy, integrated, cost-effective, and reliable by leveraging the advantage of data-driven technologies,” he says.
The MD of Varuna Group also points to the need to improve human resource skill sets, as there is a serious lack of skilled personnel and specialists in this sector. “We need training institutes that can impart training about cutting-edge technologies and promote R&D and innovation. The industry also needs workforce diversity and promote equal opportunities for women and the third gender,” Tiwari adds.
Sarang says the budget should also look at investments in more multi-modal logistics parks. “This year, as the primary focus will be on making the industry more efficient, we anticipate a Rs 2 lakh crore investment in port infrastructure to help combat logistics inefficiencies,” she says.
Industry leaders are also keenly waiting for the implementation of the National Logistics Policy, which was announced in September 2022, to streamline operations and bring down the cost of logistics.
“NLP was created to centralise this fragmented industry. In the same way, we believe that the government should devise a strategy to streamline the budget allocation process for all the various ministries involved. In the upcoming budget, the government should establish a regulatory agency to monitor and manage grants, sanctions, loans, or direct service provisions, as well as any other strategies associated with this policy,” Sarang adds.
