Logistics Sector In India - Navigating Through The Crisis

Prasad Nair, Country Manager, Toll group

Prasad Nair, Country Manager, Toll group

Post-GST (in 2017), we were assisting our customers to move from small state-wise hubs to large regional warehouses and constantly reviewing the distribution model to drive overall supply chain efficiency. This was a major shift for everyone since the traditional distribution models were being replaced with a much more agile and an efficient one, with greater visibility across the value chain and Toll India made substantial investment to support our customer demands.

Then COVID came and blew everything out of the water. Most businesses were ill-prepared for an interruption of this magnitude. Logistics sector too got adversely impacted, particularly the asset-heavy warehousing and transportation service providers.

With the frequent lockdowns and business interruption, companies were forced to have a relook at their inventory and distribution strategy. From changes in the sourcing model, increased inventory holding, SKUs /product mix rationalisation, to "de-layering" the distribution network, organisations were forced to do everything possible to retain their market share. With the near collapse of traditional distribution channels, businesses had to launch direct to customer initiatives.

Organisations started considering Supply Chain Resilience models to deliver agility, flexibility, and visibility.

Globally, the pandemic has resulted in rising costs, shipping delays, fluctuating inventory and business disruption. All these challenges have driven many businesses to re-assess lowest cost, just-in-time logistics models and build greater resilience into their supply chains. Businesses started strengthening their contingency planning to deal with such disruptions and started collaborating with their upstream and downstream partners. Sourcing and manufacturing are becoming more localised and most global organisations have empowered their regional and country teams to take quick actions to effectively manage business disruptions.

As quoted by Thomas Knudsen, Toll's global Managing Director, "Businesses face the challenge to transform legacy supply chains for the future. But we also have a unique window of opportunity to reorganise and become more adaptive and collaborative with partners in the region.

During the early part of the pandemic, logistics companies had to grapple with demands for increased storage space across all strategic warehousing hubs. Apart from expanding footprint and driving cubic space utilisation in warehouses, logistics providers had to quickly scale up their e-commerce and direct to consumer capabilities, including strengthening the last mile offering. Pandemic is also forcing logistics companies to make big investment in digitisation. From being a competitive edge in the past, digitisation is becoming a necessary survival tool.

Apart from upgrading the Warehouse and Transportation management systems, many large logistics providers are contemplating usage of IOT, AI and blockchain technologies to develop better response to future business interruptions. Smaller logistics and transportation companies may find this very challenging and could face existential risk.

To be better equipped for future challenges, logistics businesses in India need to understand and respond swiftly and effectively to the market changes, starting with the following areas.

· Have Flexible and adaptive business model to manage an increasingly uncertain environment, businesses interruptions and fluctuating volumes.

· E-commerce is creating pressures and opportunities. Pandemic has fuelled global e-commerce boom and consumers expect their goods be delivered more quickly and reliably than ever before. Businesses will need to understand, meet, and exceed customer expectations that are shaped by a diverse range of integrated platforms.

Logistics sector too got adversely impacted, particularly the asset-heavy warehousing and transportation service providers

Prasad Nair, Country Manager, Toll group

· Businesses that invest now in new technologies, such as automation, smart sensors, and data analytics, will be better prepared to integrate with rapidly evolving distribution networks. Adoption of automation like pick/put to light, voice pick, autonomous mobile robots (AMR), automated guided vehicles (AGV) are critical to warehouse transformation. Logistics providers will need to evaluate the cost benefits and implement proper automated solution, based on the sector focus and futuristic plans.

· To implement the above initiatives, logistics companies would need capable and trained workforce. Hence it is imperative to constantly train and upgrade the workforce and encourage adoption of digitisation.

· Resilience Strong Business Contingency Plans (BCPs)need to be created and aligned to customer business and needs and must have the ability to address possible business risks. Having regular cadence for testing and revising BCPs is critical for driving resilience. Further, logistics companies should have the ability to anticipate supply chain disruptions by developing right levels of visibility over a range of risk factors, including climate change.

· Sustainability Progressive logistics companies must focus on being environmentally-friendly as much as possible. From reducing carbon footprint in transportation, logistics companies should continuously work on reducing usage of plastics and consider implementation of renewable energy strategies. Many global and local companies have started measuring carbon emission on a monthly basis.