Technology adoption will steer the logistics sector through the second wave: Anjani Mandal

The logistics and trucking industry is an assortment of a few segments of transportation systems. Based on the distances covered, there are long and medium distance trucking and shorter intra-state or intra-city segments. In terms of ownership, more than 75% of truck owners were unorganized small players, and the rest are more stable bigger players. Then there are groups such as mining, cold chains, and e-commerce segments. GST allowed more freedom for organizations, and the sector was transforming the form of technology adoption by customers. This enabled the emergence of technology-enabled aggregators.

The long and medium distance horizontal has been under continuous turmoil since Q4 calendar 2019 owing to the Auto sector crash. Just as the small business segment was readjusting with the economic reorganisation and modernisation, the pandemic hit the country. It was the last proverbial straw that saw total despondency among the small businesses. During the first wave of the pandemic, they had temporary relief due to the moratorium for EMIs & Licenses. But this support lasted only till the end of the year through extensions, as the final ruling was awaited. As the second wave is passing through, this relief has not been made available yet.

Impact of the second wave on logistics and trucking

On the supply side, the small traditional transporters started to exit the sector en masse at the end of the loan moratorium period. Now the second wave is just pushing those who stayed back out of the sector. They are either selling the trucks off at the first opportunity or surrendering them to their financiers.

On the demand side, companies had a tough time during the first wave as the norms around being operational during a pandemic were still getting formed – which industries can operate, how does inter-state travel work, and how to ensure the safety of employees during continued operations.

As a result, they are better prepared during the second wave. There are clearer and more open rules to allow the economy to run with as minimal impact as possible, and not just the essential services.

But on the trucking marketplace front, the second-order impacts are wreaking havoc. The exit of smaller players reducing truck availability, factories operating at reduced capacities due to pandemic, the reluctance of drivers to do multi-day trips with chances of lockdowns, and the reduced chances of return trips have all contributed to the chaos. Because of the reduced number of trucks being available for medium to long-distance journeys, trucking costs are up by 30%+ since the start of the first wave.

This in turn is now triggering an increase in the utilisation of rail for goods movement otherwise done by trucks. The share of long-distance freight rail in the market is expected to be 50% from the 30% pre-pandemic.

How Organized Trucking Was Impacted

In organised trucking, you have the large traditional transport companies who operate a fleet both owned and market-sourced. And then there are the technology-enabled aggregators who mainly serve customers with market-sourced vehicles.

The dynamics of the logistics sector have been changing continually and Digital Tech enablement has lived up to its reputation and helped many to re-orient their operations and focus continues to move forward at each transition stage.

They are engaging customers with non-contact business cycle steps as far as possible. The major impact for the organised players has been their reduced ability to meet commitments due to truck shortfall in the market, and the higher cost at which they are now sourcing.

Digitization will see the sector through

The second wave of this pandemic is likely to continue till post-monsoon and is predicted to hit a peak this month with a slow decline thereafter. This time the corporates are better prepared to handle labour shortage and increased incidences within the factory, as most of the processes are clearly defined and the symptoms are known.

The entire industry was impacted due to the lockdowns, and most large customers have been rational and reasonable during this period. Many have paused the enforcement of negative contract terms for delays and non-placements, and the more proactive companies have adopted eGCNs, eInvoices, and ePoDs to enable non-touch, digital operations.

What the new disruption is bringing to light is how those who have better digitization are coping better. Despite a clear RoI for investments in resilience & responsiveness, few have invested well due to weakness in the economy since 2019 end. The second wave is a strong reminder to build resilience and digitization across the board, and hopefully more organizations take that next step.

The author of the article is Anjani Mandal, CEO, Fortigo Logistics