Evolution of Logistics Industry in the Last 5 Years and Expectations from 2020

By all measures, 2019 was a fabulous year for the Logistics Industry of India. Starting with an estimated market value of $160 billion, the sector is pegged to become worth $215 billion by 2020 – adding another $55 billion of net value to it. The last 5 years have been specifically beneficial for the industry, largely because of the heavy capital inflow. It has resulted in a marked shift from labor-intensive to technology-intensive operations while also creating plenty of jobs, as much as 22 million people throughout the nation.

Tech-enabled startups have also joined the club to make logistics a seamless process for eCommerce companies. The unique confluence of technology and infrastructure upgrades has considerably increased the potential of modern e-commerce companies and made shipping a hassle-free experience, thereby significantly lowering delays in the delivery of a product.

Mentioned below are a few ways in which logistics has evolved over the last 5 years and what are the expectations from 2020:

1. Warehousing

With the rollout of GST, warehousing has been a key focus area for industry players. It has enabled the warehouses to evolve from being sporadically arranged brick-and-mortar establishments to becoming centralized and automated facilities equipped with modern tracking mechanisms.

Today, they can even locate the smallest of products at the touch of a button. The average size of a warehouse in India has changed from 20,000 sq. ft. to 2-3 lakh sq. ft. according to various industry sources.

The number of eCommerce players outsourcing their warehousing requirements has also grown in the last 5 years. This development has introduced us with multi-client warehousing (which allows different businesses to use the same warehouse for storage) across metropolitan cities such as Delhi, Mumbai, Pune, and so on. We have also seen higher roof ceilings for vertical stacking of the products.

A report by Ernst & Young shows that the Indian warehousing industry has a net worth of $560 billion. This net worth is bound to grow considerably with the constant influx of automation into the segment. We have also witnessed the adoption of the Warehouse Management System (WMS), which helps to track inventory, orders and provides data about the stored goods, hence, tangibly expanding the competitiveness. Now, with a surge in the price of real estate, optimum utilization of warehousing is taking place as the owners are desperate to make ample use of every square foot of the space.

Expectations from 2020:

eCommerce players looking to establish a stronger foothold in Tier 3 and 4 cities, where the demand is comparatively lower and the infrastructure is not up to the mark as compared to Tier 1 and 2 cities. So, 2020 will be mostly about the deployment of fulfillment centers across strategic locations. Doing so will help in bringing the inventory much closer to the end-customers. Increasing investments will also lead to an increase in warehouse capacity, greater automation, and more organization with the help of multi-client warehousing. Also, with an excess of labor, the focus will also be on training the staff to drive more efficient operations.

2. Transportation

The transportation segment has heavily invested in IoT to build a smart infrastructure over the last 5 years. The attention has specifically been on fleet management via advanced technology, wherein eCommerce companies can track their fleet/packages in real-time. Also, the cost of doing this has become nominal for the seller. The optimum use of IoT has also led to an increase in transparency, better route planning, less turnaround time, shipment monitoring, etc. Hence, it has greatly reduced the overall logistical costs.

Automotive Industry Standard 140 (issued by Automotive Research Association of India) has also contributed to an intelligent transportation system. It paves the way for innovative services connected to different modes of transport (especially public transports) and traffic management. It is helping the market players to stay informed about what transport networks yield timely deliveries.

Expectations from 2020:

Road networks in Tier 1 and 2 cities will need to be developed enough for average vehicle productivity to increase to 350-400 KMPD by reducing congestion. Similarly, the poor road conditions in Tier 3 and 4 will have to be improved for transportation to work efficiently in these areas so that the last-mile deliveries can take place to tap the burgeoning demand. With the rising competition and consolidation in automation, the cost to transport goods is bound to reduce significantly. Drone delivery/air delivery will be introduced into the system, hence, making the concept of faster last-mile deliveries a tangible reality.

3. Returns and NDR

The past 5 years have seen considerable momentum to drive last-mile deliveries with lesser frequency of NDR and RTO. A lot of eCommerce companies have aced it and increased the competition for small and medium brands. Hence, it has made it imperative for them to rely heavily on automation, real-time tracking, and choose the best courier partner for their shipments. Third-party logistics companies like Shiprocket have come up with tech-enabled solutions that are empowering the sellers to do precisely the same, thereby retaining their market edge.

Leveraging AI and Data Analytics, a CORE rating assists the onboard sellers to select the best logistics operator for their individual package deliveries. Such solution providers also equip their sellers with real-time tracking, issue escalation, last-time delivery alterations (including delivery date and address), IVR calling facility, and more for an interactive and streamlined process. Ultimately, the approach effectively resolves the challenge of NDR and RTO.

Expectations from 2020:

In 2020, third-party logistics providers will penetrate deeper into the system. This is because both eCommerce companies and independent sellers will seek to avail the assistance of technology to overcome the challenges of NDR and RTO.

4. ETA

Evolution of the highest order, the time taken to complete last-mile deliveries for the eCommerce companies has reduced significantly during the said tenure. Hyperlocal delivery companies like Dunzo, Swiggy, and Zomato have acquainted urban Indians with interesting concepts such as cigarette, grocery, and food delivery in as much as 30 minutes.

Amazon’s same-day shipping model has virtually stunned the logistics sector and has combined the convenience of online shopping with the facility of quick access to a product. These developments have intensified the competition for small and medium eCommerce companies to follow the suit. This is largely because people now believe faster deliveries to be an imperative rather than perceiving them as a luxury.

Expectations from 2020:

The sole focus of eCommerce companies will be on bringing the inventory closer to the customers by creating fulfillment centers across various parts of the cities. For this, the players will have to partner with Kirana stores or small local shops for storage of goods. It will ensure that the product gets picked up for delivery as soon as an order gets placed.

Lastly, with 2020 just around the corner, it is time to begin the celebrations and wait for the countdown. We know how the coming year is going to be, after all!

Saahil Goel, CEO & Co-founder, Shiprocket