For a nation of the size in terms
of landscape aand economy of India, logistics plays a very crucial role in its economic
development. India ranked 44 in the World bank’s Logistics Performance
Indicator (LPI), 9 places lower from its 2016 rank of 35.
Albeit a critical cost driver for
all products sectors, there is only sluggish growth in the sector. The
logistics cost in India is estimated to be 13%-14% of the GDP compared to USA,
Europe, Japan where it is 9%,10%,11% respectively.
In Germany, it accounts for
just 8% of the GDP. Germany is now the world leader in the logistics industry
ranked 1 in the LPI for 3 consecutive years. The market share of Germany accounts
for about 25% of the total of Europe’s logistics market.
Lessons from Germany
The main takeaways for the Indian
logistics industry from Germany are:
1. Deployment of the finest
transportation infrastructure. The highway network density of Germany is twice
the average of Europe.
2. Germany has put in place, what are known as Freight
villages that provide:
·
Support services such as cargo delivery points
·
Connectivity to the long-distance network
without getting enmeshed into the local delivery points.
3. Paper-based inventory is
replaced with speech-based inventory picking.
4. Radiofrequency identification
reader antennae installed at strategic locations are used to track carts or
trolleys, as they travel between the receiving dock and storage areas.
Bottlenecks in the Indian
Logistics Industry
1. Infrastructure
The Indian logistics industry is
plagued by low-quality infrastructure facilities such as fleets, storage
facilities etc. While a nation like Germany, which is 9 times smaller than
India and with population density half that of India spends 1.22 Lakhs Crores
on logistics, the budget allocation of India for the whole of the Transport Sector
in the year 2020 is just 1.69 Lakhs Crores.
2. Lack of skilled manpower
The industry needs labour with
specialized skill sets such as warehouse management, quality control, truck
driving etc. to name a few. Given that more than 90% of the sector is
unorganized, there is barely any attention given to nurturing the skilled
workforce.
3. Red-tapism
The cumbersome paper works of
getting the goods transported after complying with several regulatory
requirements such as E-way bills under GST etc. hampers the movement of goods.
IT systems and EDI (Electronic Data Interchange) facilities are inadequate to
foster the functioning of the industry.
4. Inefficient Intermodal Mix
Deploying an optimal mix of
transportation mode in such a way that it could reduce the end cost of
transportation to the consumers is a necessity for the development of the
industry. In India, the mix is skewed with 60% of the transportation happening
through roads, which has proven to be inefficient. There is a dire need for
proper coordination between the central and state government in facilitating a
proper inter-modal mix of transportation and this calls for a separate ministry
or a body (such as Central Water Commission in the case of water resources) to
administer the logistics industry.
If we break down the LPI in terms
of scores of the individual parameters, the major areas where the performance
lags are Infrastructure and Customs clearance process.
If the aforesaid loopholes
could be plugged, India could witness a major fillip in the overall economic
development of the nation.
(*Article originally published in CAclubindia.com)
