A review of challenges faced in Indian Logistics

You will not find it difficult to prove that battles, campaigns, and even wars have been won or lost primarily because of logistics Dwight D. Eisenhower

The logistics industry in India can easily be called the backbone of any sector’s supply chain. Let it be the , hospitality ,healthcare or manufacturing industries, logistics companies play one of the most important role of connecting the organizations to their clients.  Logistics industry has a critical & sometimes overlooked role by the general public to play a crucial role in the manufacturing industry and trading activities. It is considered as backbone of every economy. In simple words logistics can be considered as movement of goods from point of origin to point of consumption.

1. Indian Roads 

image source:- change.org

The road quality in India, on the NHs as well as the roads is still poor in many locations. Estimates suggest that motor able roads are still less than 10% of the total road network

The trucking industry in India is largely fragmented and in the hand of small truck operators. Estimates suggest that nearly 70% of the truck owners in India own between 1-5 trucks. Due to this there is fierce competition amongst operators leading to truck owners resorting to overloading to recover investments directly effecting economy prices.

Trucks in India have to pass through number of check points in their journey. Trucks have to stop at state borders , for RTO inspections ,for payment of toll taxes from freezing cold of Jammu & Kashmir to fluctuating hot weather of the south etc.

2. Warehousing

Everyone is aware poor warehousing facilities in India. Several cargos incur a lot of damage because of pest-infested warehouses, damage due to leakages, lack of storage space, low maintenance and more. This is seen on a regular bases in low margin goods and cargo.  The Governments use the biggest warehouses to store grains, which leaves very little space for cargo storage , most of the food stored under government goes unused or rotten due to unsystematic and dishonest distribution . Most of the warehouses are not inspected thoroughly on a regular bases , unhygienic conditions , not carried with care leading to broken packages received by the customers , misplace of goods , etc.

3. Tariff

Reality check says..

Average tariff rates in India are much higher than in the world’s biggest economies. They are also high compared with emerging economies , although other countries including the US do impose high tariffs on specific products.

Varying rules & regulation , Red tape which varies at different stages, enforced by national, regional and local authorities is a big obstacle. It creates unnecessary gaps in the smooth functioning of the Logistic Industry.

Upgradation of government regulations can bring tremendous change in Indian GDP , just by improving already existing basic facilities . Another aspect is the introduction and upgradation of the government regulations is that these are related to the freight services. They effectively enhance the costs of the trucking per hundred or thousand kilo meters distance. Thus, this effectively enhances the cost of trucking in India for the companies opting shipping their products.

4. Shortage of skilled workforce

The figures are alarming , ” According to a study from 2017, 90 percent of those surveyed estimate the shortage of skilled workers in the transport and logistics industry as noticeable to highly noticeable “. Companies are not only receiving fewer and fewer applications for jobs as drivers or warehouse logistics specialists. There is a lack of young talents at all levels of qualification , specifically around logistics & retail management.

Many companies in the logistics sector are therefore hit twice by the low number of applicants: on the one hand, he companies are not able to retain enough specialists for the transformation process, and on the other hand, there is a lack of the skilled workers still needed for operational activities in warehousing and transport . As, the implementation of logistics requires 4.0 employees with the appropriate skills.

According to the German Federal Association of Freight Forwarders and Logistics Operators (DSLV), there is now a shortage of around 45,000 to 60,000 truck drivers in Germany – and the number is rising. Other low-skilled employees such as delivery staff, dispatchers and warehouse staff are also desperately sought. source:-arts/eu

5. Fragmented unorganized sector

Currently the Indian logistics industry is highly unorganized and fragmented . Owing to the presence of numerous unorganized players in the industry, it remains fragmented with the organized players accounting for approximately 10% of the total market share. With the consumer base of the sector encompassing a wide range of industries including retail, telecom, automobile, heavy industries , pharmaceutical etc., logistics industry has been increasingly attracting big investments in the last decade.

6. Lack of efficient Technical system

” Information technology is at core of how you can do your business and how your business model itself evolves. ” – Satya Nadella

In the era of technological innovations, it is a must to adopt technical solutions to counter the challenge of technological advancements in logistics.

To become one of the top logistics companies in Indiaadopting shipment tracking systems, automation systems, data analytics and even IoT is a smart move to compete with the best.

The sector is facing challenges such as under-developed material handling infrastructure, multiple regulatory/ policy making bodies , ack of seamless movement of goods across modes, fragmented warehousing, l minimal integrated IT infrastructure. In order to develop this sector and make the total use out of it focus should be on new technology, skills , improved investment across , removing bottlenecks, automation, improving inter modal transportation , single window system for simplified processes and giving clearances would be required.

7. Inefficient inspection strategies

With the serious lack of skilled personnel and specialists in the Logistics sector in India , there is also lack of inspection teams , management & required strategies not only the drivers but also The inspection teams are under-skilled, over-worked and lack the desired skill-set to make the process more efficient. To save on capital, companies also compromise on the training of their logistics staff and also their payments. Eventually, these companies face problems like high labor turnover, increased training costs and under-performing human resources.

8. Lack of government support facilities

As mentioned before our government still hasn’t contributed much favors regarding the followings :-

  1. Excessive paperwork :- Just a simple google result will lead you up to a good number of paper work , a lot of permission forms , forms for drivers , forms for the material carried , forms for taxes paid & to be paid , etc.

2. Fuel Cost :- Higher prices create a ripple effect throughout the economy. By pushing up prices of key consumer goods, higher energy costs end up in government inflation data, which informs Federal Reserve policy and, ultimately, interest rates. Ironically, higher inflation and interest rates have an inverse relationship with prices, meaning higher fuel prices ultimately influence factors that cause prices to return to lower levels.

3. Rail Tariff :- The tariff mechanism of the Railways is a complex matter. It has to facilitate the system of services for demand as well as supply. At times, it has to create its own demand because transportation services are neither storable nor transferable. In this regard, so many pricing patterns have been formulated from basics to dynamic, from flexi- to surge-pricing. And still nothing is final. How will an outside agency—a regulatory body—unaccustomed to the Railways’ homogenous pattern, work out the whole system? There are dangers of its failure and unacceptability. The Railways has already shrank in size and authority by withdrawing from presenting a separate budget.

India has for years now put very high (trade) tariffs on the US. It’s the king of tariffs. This is unacceptable ” – Donald Trump

4. The corruption within :- There are abundant reasons for the cause of corruption in India. The primary reasons being lack of effective management in organization. Due to mismanagement, there is a weak control on various departments and their working. This uncontrolled & unsupervised administration gives way to rise in corruption in small scale, which results in large scale corruption. Besides, appointment of inefficient managers, supervisors and executives at various levels of our structural hierarchy also leads to mismanagement.

Secondly, lack of support for good leaders. Due to very fewer good leaders, they find hard to deduct corruption from the society. But due to lack of support and cooperation from important sections of the society, good leaders are often defeated , suppressed &overlooked. Lack of proper vigilance systems in the country. Here, some officials are tempted to get illegal money, leaving corrupt people without any punishment or any kind of penalty. Lastly, lack of economic stability which leads to unemployment & changes in standard of living in India. It also leads in developed feeling of insecurity in the minds of affected people which were sadly taken advantage by corrupt people.

Example :- The Fodder Scam , ” The Fodder Scam involved hundreds of millions of dollars in alleged fraudulent reimbursements from the treasury of Bihar state for fodder, medicines and husbandry supplies for non-existent livestock.

The scandal involved the embezzlement of about ₹9.4 billion (equivalent to ₹39 billion or US$540 million in 2019) from the government treasury of the eastern Indian state of Bihar. 

Among those implicated in the theft and arrested were then Chief Minister Of Bihar, Lalu Prasad Yadav, as well as former Chief Minister, Jagannath Mishra. The scandal led to the end of Lalu’s reign as Chief Minister.” – Wiki

9. Last but not the least , Fuel Costs

The biggest challenge in logistic industry is high fuel costs. If the fuel prices goes high is to increase transportation costs to the shippers. Raising the fuel prices are increasing the surcharges added to freight rates, this will cut down the earnings of truckers and revenue as fuel prices increase.

The logistics companies are completely dependent on the rates of the fuels for the calculation of the transportation services. The fuel costs influence the calculation of the trucking rates in India in a vigorous manner. They include the additional expenses of the fuels along with the transportation costs in order to maintain the profits. If the distance between the statement and the endpoints is huge then fuel consumption will be more. Not only that it will also add cost to the driver’s hard work.

sources :-

Wikipedia :- https://en.wikipedia.org/wiki/Indian_Railway

Fodder scam :- https://en.wikipedia.org/wiki/Fodder_Scam

ministry of commerce & industries :- https://commerce.gov.in/

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