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Page 1 of 3 IT is expected to drive growth in the next phase of the Indian logistics sector’s evolution. We take a look at the kind of IT tools that the sector needs urgently to bring in efficiencies of scale and growth.
The statistics related to the Indian logistics industry’s growth are heartening. The sector is growing at an impressive rate and has a promising future. Unfortunately, a large chunk of the revenue earned by this industry is being absorbed by administrative and operational costs.
{quotes}The reasons for this revenue leakage can be largely attributed to the sector being highly unorganised and fragmented{/quotes}, which prevents it from reaching its true potential. These inefficiencies of scale operate mainly as a consequence of low technological penetration and the resistance/inertia of this industry to change, and the adoption of technological advancements. IT could change all this. In the words of Sumeet Nadkar, head—Logistics SBU, Kale Consultants: “A huge chunk of the operational costs can be reduced through IT adoption, which would result in process efficiencies.” The bottlenecks The logistics sector has been a slow adopter of technology. Ashish Sonal, CEO, Orkash Services, observes that this inertia to IT adoption arises from three inherent characteristics of the Indian trucking sector, which are also what IT applications should help address. He enumerates: “There is an urgent need to address operational and strategic issues, like the highly fragmented and the unorganised industry structure, the supply-demand mismatch, and the lack of intermediaries resulting in high transaction costs and business inefficiencies with cost-effective IT solutions. Lastly, operational inefficiencies, such as lack of logistic clusters, high maintenance costs, etc, add to administration costs.” Nadkar seconds this and adds: “This is a tough market that has not spent money on IT a. It will take immense domain knowledge for an IT provider to understand the needs of this largely unorganised market.” Sonal feels that there are glitches even at the human level. Since a large proportion of companies in the sector are at low maturity levels when it comes to technology, IT companies will have to also deal with attitudinal bottlenecks and the sector’s inertia to change. He adds: “A part of the problem arises because a majority of the work force is illiterate, leading to a shortage of skilled manpower. Furthermore, a huge proportion of the logistics companies are not very professionally managed and hence the lack the fervour to venture ahead with new technological advancements.”
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