Indian logistics Industry and what startups need to know about the sector.
Posted: Jan 06, 2016
We had covered some time ago that why India needs more startups dedicated to solving the logistics and supply chain management problem. We have now entered 2016 and the overall sentiment about the logistics industry is still mixed. Indian logistics firm were on a sweet ride in 2015 with total capital invested via various investors jumping from $69.3 to a staggering $617.7 million.
This sudden surge in investment and attraction to the logistics industry in past couple of years is witnessed due to a catalyst. The eCommerce industry realised that they can't achieve profits in India until the country resolves its infrastructure and transportation issues. Hence, to solve our countries logistics woes many eCommerce giants started with their own logistics arms like Go Javas (Snapdeal) and eKart (Flipkart). Simultaneously, many major investors realized the importance of backing a logistics firm to resolve not only the eCommerce transportation and infrastructure issues but a problem that is extremely complicated in nature in our country which has a direct and a sizable impact to our economy.
In 2015 many startups focused on creating powerful backend technology, hyperlocal delivery services and even truck aggregators and it will be safe to say that the industry is evolving rapidly. As Logistics and supply chain is undoubtedly the backbone of our economy, let’s look at few of the key challenges faced by the logistics industry.
1.Lack of Training…
This is a twofold problem, on one side there isn’t enough trained manpower in both the third party logistics sector and the manufacturing and retailing sector. The other side that is responsible for making this sector deficient is the lack of adequate training institutions which has led to a deficit in skilled management and service professionals.
2.Fragmented and Unorganized
India at present spends around 12 per cent of its GDP on logistics, despite the huge scale the industry is extremely fragmented and unorganized. Almost 57 per cent of freight in India still moves on the road network and lack of effective and controlled planning, state-to-state border issues, tiresome documentation has increased strain in the network and to top this lack of a capable railway system just adds more dependency on the road network.
There is a genuine scarcity for 'Special Types of Equipment,' like tech-driven refrigerated storage solutions, etc. To add this, poor facilities and management account to high levels of damage, loss and deterioration of stock. This is one of the major problems in the warehouses' dealing with perishable items. With the increase of transportation of perishable products, good storage and effective warehousing solutions is of the utmost importance.
4.Lack of research and development
As mentioned above that there is a serious need to fill in the gap of skilled Indian logistics management and solutions. The field of research in the sector is highly under penetrated. Prioritizing research and technology can provide various tech-driven solutions for several pain points in the industry. By optimizing tech-driven research and development, the industry can become more cost competitive and decrease process inefficiencies.
Indian logistics needs to come on par with global practices and standard which is extremely important for the future growth of this sector. Our country is receiving a considerable attention by a flurry of venture capital investors and dynamic logistics startups but in spite of its growing potential the sector has not kept up with its rapidly growing economy. Startups can expect a great future in this industry, but there is a serious need to figure out solutions for these key challenges and get it right.