😲 How Did Indian Logistics Become Cheaper?
India made an impressive sprint and jumped 6 places to rank 38th out of 139 countries in the World Logistics Performance Index 2023. How? Read on.
Hello ReadOnians!
As 2023 comes to an end, it is time for retrospection.
Today, we are going to look back at how India’s logistics sector performed.
According to the World Bank's Logistics Performance Index, India ranked 38th out of 139 countries in 2023.
That's a rise of six places from last year!
What's more?
Our logistics costs have come down from 13-14% to less than 9% of our GDP.
What's behind this impressive growth?
Read on.
Good News for India
The government has had a clear objective this year - it wanted to focus on infrastructure development.
And it did.
It is spending over Rs. 10 lakh crores towards capital expenditure this fiscal year - a 33% increase from last year!
This money mostly went into improving roads and ports networks, and digitisation of supply chains.
How did it help the logistics industry, you ask?
Logistics costs including transportation, warehousing, insurance and administrative charges came down.
Result?
Average waiting time for a truck cargo at a port in India: 3 days.
US: 7 days.
Germany: 10 days!
National Logistics Policy: A Catalyst for Change
India also launched the National Logistics Policy in September 2022.
This policy had three major objectives:
Reduce logistics costs in india
Create data driven decision support mechanism for an efficient logistics ecosystem
Improve the Logistics Performance Index ranking
Adding to the policy, is yet another superpower: digitisation.
Predictive analytics, Internet of Things (IoT), real-time decision-making, and drone technology are not just buzzwords; they're transforming the way India does logistics.
Think electric vehicles and green cold chain solutions.
It's not just about moving goods; it's about moving them sustainably.
Challenges for Further Cost Reduction
While we have brought down our logistics costs, there’s still a long way to go.
We want to be among the top 25 countries by 2030.
And the path to the top is often not as straightforward as it seems.
Here are some challenges that we need to address:
Fragmented industry: The logistics industry is still dominated by unorganised and fragmented players, especially in tier 2 and tier 3 towns and villages.
This leads to inefficiencies and higher costs for MSMEs and cottage industry players, who rely on local, unorganised logistics providers.
Uniform policy implementation: Varying policies and tax structures across states create inefficiencies.
This lack of uniformity results in duplication of efforts, higher costs, and time-consuming processes.
A more uniform policy could streamline supply chains.
Digital adoption: Accelerating digital adoption, especially among MSMEs, is crucial for reducing costs and improving efficiency.
Infrastructure development: Improving transportation infrastructure, including optimizing waterways and developing better road and rail networks, is essential.
How can we optimise logistics costs?
To further reduce logistics costs, the following strategies can be implemented:
Improved Route Planning and Freight Consolidation: Optimising routes and consolidating cargo can significantly reduce costs.
By planning routes based on cargo destination, transport form, and delivery timelines, logistics providers can reduce travel distances and times, thereby lowering fuel and operational costs. This optimisation will also ensure more efficient use of cargo space and resources.
Wider Digital Adoption: Implementing technologies like warehouse automation, AI, and real-time tracking can minimise human resource needs and optimise costs.
Collaboration and Resource Optimization: Collaborating with different stakeholders can enhance reach and reduce costs, especially in developing warehousing and transportation networks.
Developing 3PL and 4PL Networks: Supporting the rise of third-party and fourth-party logistics providers can help build an affordable and efficient logistics network.
By outsourcing logistics services to these professionals, businesses can benefit from their expertise, technology, and networks, leading to reduced costs and improved service standards.
The Road Ahead
With these strategies in place, combined with the NLP and digitisation, India is well on its path to becoming a global manufacturing and logistics hub.
What other sectors can India lead in?
Let us know in the comments!
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Why does it seem like an AI written article? There are more jargons used than explained.Just a genuine feedback