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Transforming the Logistics Landscape
Digitrack

Transforming the Logistics Landscape

Ravi Kumar Pillai

In the list of the top ten container ports of the world, seven are in China. The other three are in Asia too - Busan (South Korea), Dubai (UAE) and Singapore. That shows the complete dominance of Asia in the global shipping industry. India with its 1.3 billion population and nearly US$ 3 trillion Economy does not figure even in the top 25 global mobility hubs. Only JNPT (Navi Mumbai) and Mundra in Gujarat are coming anywhere near the global scale logistics operations. Doesn’t this speak of the Himalayan infrastructure deficit that we need to bridge if we have to be taken note of seriously by the world in any discussion of trade power?

We are endowed with a vast coastline, opening to both eastern and western geographies. Yet, for shipping in to the peninsular India, we are greatly dependent on trans-shipment through intermediary hubs capable of berthing larger container ships. In fact, as much as 35% of the cargo to and from Indian ports was routed via foreign transshipment hubs - such as Colombo, Singapore, Dubai and Klang (Malaysia).

While we were moving at snail’s pace in developing the much-needed logistics infrastructure comprising of transportation, warehousing and financing, the world has progressed in leaps and bounds. Look at Dubai, which has emerged as a transportation and logistics hub servicing not only the Middle East and North Africa (MENA) Region but also the South Asian subcontinent. UAE has recently signed an MOU to host a massive US$ 4.5 Billion Multi-Mode Global Logistics Hub to serve as hold and transshipment centre for the massive manufacturing base of China.

‘Sagarmala’, the network of ports being developed along the Indian coastline is a late but nevertheless strategic initiative. But even the projects kickstarted are feeling the pinch of inadequate governmental support – look at how Vizhinjam Port Project on Kerala is struggling to get a regular and assured supply of boulders. The project has already considerably slipped behind schedule and the commissioning date is anybody’s guess.

Global logistics industry today is in the cusp of comprehensive growth involving multi-mode integration, infrastructure standardization and scale up, digitization of data management, deployment of emerging digital technologies like artificial intelligence, Internet of Things (IoT), robotics, drones, etc. to achieve faster turnaround and cost optimization of logistics operations.

The logistics and supply chain sector is growing significantly year-on-year. Because of the low base (arising out of outdated and fragmented nature of the industry), India’s logistics industry is projected to record above 10% compounded annual growth rate (CAGR) and achieve US$215 billion size by 2020-21.

Poor logistics infrastructure and deficiencies in governance add a huge economic drag on the country. As a corollary, reforms, technology upgrade and enhancement of governance practices can boost efficiency and productivity. The annual loss to the Indian economy on account of delays in transportation due to poor road conditions and the fuel cost related to such hold ups was approx. above US$ 21 Billion in 2016-17.

Logistics covers the movement of products all the way from manufacturing hubs to the ultimate customer; the logistics value chain comprising transportation, warehousing and last-mile delivery offers scope for significant infrastructure and process upgrade with the deployment of digital technologies.

In the transportation segment of logistics, smart and connected devices constituting the ecosystem of Internet-of-Things (IoT) are enhancing fleet management effectiveness. Smart Fleet Management systems and applications aided by sensors, GPS-based traffic management and monitoring through Electronic Log Devices (ELDs) ensure that drivers follow safe, secure, healthy and cost-effective driving practices.

Digitization has enabled effective outsourcing - from the basic outsourcing model to comprehensive end-to-end outsourcing referred to as 4PL where the manufacturer-supplier can outsource the entire value chain from ex-factory stage all the way to hiring and management of fleet, professional storage, stock management and servicing at the customer end. Blockchain would tremendously enhance the process integrity and effectiveness where the procedure involves successive handovers and value addition by multiple shareholders.

Logistics hubs are adopting multi-mode operations with the convergence of surface-water-air transportations in a seamless and cost-optimal manner. In a bid to enhance the logistical efficiency on India’s highway network, the transport ministry is planning a network of 35 multi-modal logistics parks which will account for 50% of the road freight in the country. A small beginning has been made in the area of inland cargo movement through waterways and the momentum needs to be carried forward. Dedicated freight corridor and establishment of manufacturing-dedicated economic zones in the contiguous areas along the route are also encouraging initiatives. We expect to see the planned Mumbai-Delhi Industrial Corridor operational over the next 5-10 years.

Digital technologies are playing increasingly transformational role in establishing and continuously upgrading multi-mode transport chain by providing real-time visibility, efficient data exchange, and better flexibility to react to unexpected changes. Some of the pathbreaking technologies impacting logistics industry are highlighted here:

  1. Cloud Computing and Data Analytics applications are being increasingly adopted in transportation industry with noticeable enhancement to process efficiency and productivity.
  2. Collaborative Robots are already deployed by global leaders like Amazon in sorting, packing, labelling and stacking of consignments in major smart hub operations.
  3. Robotic Process Automation (RPA) finds application in transportation sector -

road, rail, sea and air - to eliminate costly manual functions by automatically acquiring, integrating and delivering data across the supply chain by sharing real time feeds to the stakeholders such as shippers, carriers, logistics partners, freight bill payment processors and other trading partners. RPA enables employees to focus on providing customer service with a human touch by entrusting data management to faster and more reliable automation applications.

  1. Unmanned Aerial Vehicles (commonly known as Drones) are already being used on pilot basis in last-mile delivery of consignments to remote locations.
  2. Automated driverless trucks may carry cargo to the destinations and the last mile delivery may be handled by drones, the process being managed with the help of robots – collaborative robots, software robots and may be humanoid robots. (For now, in the realms of possibility but may not be soon enough!)
  3. Applications involving Artificial Intelligence and Machine Learning, Blockchain and Virtual and Augmented Reality are under development and evaluation and are expected to be deployed extensively in future.

Warehousing is critical in the Indian context. We know of the massive wastage of agricultural commodities due to poor management of warehousing. Every year huge quantities of rice, wheat and pulses get wasted or damaged due to poor packaging, pilferage, decay and handling losses. Massive amount of fruits, vegetables and flowers are wasted due to absence or poor management of cold storages in remote locations in the vicinity of farms and fields.

India is among the world’s largest food producers. Yet 15% of the population goes hungry every day, 1 in 4 children are malnourished and 3,000 die every day from illnesses related to poor diets. Although there is an abundance of food in the country, disorganized supply chains fail to transport, store and distribute produce effectively. Due to failed cold chain transits, poor warehouse conditions and traffic delays, India wastes 40% of all harvested agricultural produce – that is more fruits and vegetables than the entire quantity the United Kingdom consumes and more grain than Australia produces each year. The cost to the nation is over $ 14 billion or INR 92,000 crores.

By keeping warehousing as an exclusive preserve of the Public Sector, we have stifled over the years the massive opportunities for innovation, investment and technology upgrade to match global standards. The unshackling of warehousing and encouraging private investment have just begun and need to gather momentum for rapid infrastructure upgrade. Especially for preserving and transporting perishable agricultural and horticultural products, establishing cold storage chains with state-of-the-art technologies across India cannot wait any longer. This requires massive collaborative efforts between global players, Indian private sector and the Governments- both at Federal and at State levels.

It is predicted that by the year 2020, more than 50 billion objects will be connected to the Internet. The future warehouses will be connected facilities where the storage, material handling and mobility devices will be sending and receiving information regarding the incoming, in-storage and outbound materials.

A drone equipped with sensors, cameras, barcode scanners, or RFID technology can reach even the innermost spaces within a warehouse. These can complete checks and manage inventory in less than one third of the time needed to do it manually. Automation and robotics can simplify performance of manual tasks, in much less time and cost with increased efficiency.

Last-mile connectivity as a critical logistics activity has gained immense importance due to the emergence of e-commerce as a major channel of distribution. The growth of the e-commerce industry and the changing buying habits of retail customers have created a huge logistics marketplace for the last-mile delivery. Last-mile services have become a critical logistics segment with a host of startups entering the fray and disrupting the ecosystem.

Aided by the emerging technologies, logistics sector is expected to throw up massive employment potential. Logistics has a cascading effect on employment generation due to the linkages it has with the end-to-end agricultural and manufacturing value chains. Both economically and socially, India needs to commit more resources to upgrade the infrastructure and human capabilities to operate in the age of digital logistics.

*Ravi Kumar Pillai is CEO and Principal Consultant at Cherrypick India, Trivandrum and can be reached at ravikumarpillai9@gmail.com