_Logistics & Warehousing: Global Benchmarks for the Indian Industry

In the present era of globalisation, customer satisfaction is the norm. The booming e–commerce sector has made the act of sale and purchase very easy and quick.

Supply chain processes are under immense pressure to efficiently and effectively meet this growing demand within a stipulated time and cost. If the right product does not reach the right customer within the prescribed time then the company loses not just business but also reputation. As a result, warehouse floors are always under high pressure.

Warehouses are not just about storage anymore. They also function as fulfilment centres, distribution centres, return centres, and at times as showrooms. It is necessary to improvise on functional, technological as well as warehouse development aspects to efficiently handle these additional functions.

Best practices in supply chain design and management from across the globe should be adapted with modifications and recalibrations suitable to Indian needs. Discussed below are a few significant global practices:

• Smart warehousing – Like smartphones, smart warehouses are the ones that effectively perform multiple functions simultaneously. All gadgets and devices in the warehouse are fitted with sensors and are connected to each other via the Internet. This connectivity gives the gadgets the ability to coordinate their processes thereby enabling seamless operations.
• Robotics – New and advanced robotics can help boost productivity of logistics operations. Equipped with high–resolution cameras, pressure sensors and self–learning capabilities, these robots can be used to perform tasks like picking, packing and sorting, or assist in loading and unloading of goods.
• Big data – A massive amount of data is generated in logistics at every level and every minute and this data is huge, diverse, unstructured and high in frequency. It can be effectively used with the help of big data analytics. In India, companies like Wipro have developed business intelligence tools such as Insta Intelligence that automate logistics processes.
• Relay Trucking – An established practice in developed markets, relay trucking facilitates optimisation by round–the–clock movement of freight trucks. In India, companies like Rivigo are introducing this global practice.
• Temperature-controlled warehousing – Also known as cold-chain warehousing, these are warehouses equipped with temperature–controlled systems required for the storage of cool cargo products like fresh agricultural produce, frozen foods, photographic films, chemicals and pharmaceuticals. They need to be stored and transported in designated temperature and chemical environments to prevent damage. This trend is at a nascent stage in India, limited to industries like pharmaceuticals and some perishable FMCG products like milk, where it is mandated by the regulator.

Where does India stand?

The Indian logistics industry has grown leaps and bounds in the last 8-10 years. The global practice of 3PLs (third party logistics) and 4PLs (fourth party logistics) has gained considerable popularity in the country. Enormous growth in the e-commerce segment is adding to the development in logistics and warehousing sector.

Indian company Rivigo has introduced the global practice of relay trucking in India but it is at a nascent stage and has immense scope for growth, especially with the advent of Goods and Services Tax (GST).

Elimination of state tax barriers will help increase time and cost efficiencies in trucking. According to our survey, earlier the travel time between Delhi–Chennai, which used to take 5–6 days, post-GST, has come down to 3–4 days.

Trucks are able to cover longer distances every day with an improved turnaround time ensuring that the transporters can carry out their business with a smaller fleet.

Similarly, the globally practised hyperlocal model and the technological advancements in big data have been successfully adopted in Future Group’s Big Basket venture and Wipro’s Insta Intelligence automation tool respectively. However, India still has a long way to go in terms of catching up with numerous other best practices.

Thus, adapting and adopting international best practices as per Indian environment is the way forward. The above examples are significant few beginnings in the right direction.

However, there is still a long way to go for India to meet the standards of its global counterparts. And this gap can be covered with the help of positive reforms like Goods and Services Tax (GST).

Elimination of state taxes is facilitating faster movement of goods across the country. As a consequence of faster movement, in the near future, companies would need to carry smaller levels of inventory to support the same level of sales.

This would reduce the inventory carrying costs and working capital requirements leading to significant financial savings. Also, post GST with the removal of interstate checkpoints, reduction in cargo movement time and replacement of multiple state and central level taxes; the need for maintaining warehouses in every state has been eliminated.

A mother warehouse for a particular geography will suffice a company’s needs, thus offering economies of scale. This puts a strong case for consolidation of warehouses across industries, although, not uniformly across the board.

Further, warehouses will now play a significant and larger role in the entire supply chain as they will function as facilitation and fulfilment centres apart from just storage functions.

All such policies have increased the interest of global players in Indian markets. Indian logistics sector growth will be accelerated by inflow of foreign funds as well as global practices.

They will add to the efficiencies and ensure compliance as well as standardization, thus facilitating formalisation of the industry. Nevertheless, India has a wide gap to cover in reaching the efficiency and effectiveness of supply chain processes as offered by its global compatriots.

Click here to know more: Research - India Warehousing Market Report 2018