A good logistic support and supply-chain management is the backbone of any business involving manufacturing or supplying of goods. According to a market research, India is currently spending a whopping 14.4 per cent of its GDP on transportation and logistics related services compared to eight per cent by other developing nations.
With GST round the corner and expected to be implemented from 2017, the logistics market in India is likely to grow at a CAGR of 12.17 per cent by 2020, largely driven by the growth from e-commerce sector followed by retail and manufacturing sectors. The boom in e-commerce sector has far reaching implications on the growth of logistics sector, as dependable logistics infrastructure is crucial for success and sustainability of these firms.
Though there are challenges involving quality of services, with the implementation of GST, logistics companies are expected to optimize their operations to cut cost and increase margins.
Currently, logistics firms have no choice but to have many small warehouses across cities and towns. The growth in e-commerce has increased the service geography of these firms but they are unable to meet the demands of fast delivery services such as hyper-local delivery.
Smaller and upcoming logistics companies are finding hard to compete with larger and established peers in terms of pricing and delivery related challenges. They lose out on reliability, says Bhaskar Venkatraman, Founder and Director of Justransact.com, the first ever e-commerce firm on Point of Sale (POS) technology products such as barcode scanners, barcode printers, tablet POS, hand held devices, all are used to increase efficiency and productivity in logistics and transportation related services.
“Logistics is one of the key areas where E-commerce companies, particularly the startups, find is hard to sustain due to high cost and low reliability factor which is crucial to build a strong customer base. Due to high logistics cost, most of the companies end up compromising on profit margin while supplying products to consumers. Though there has been a spurt in logistics firms which promise prompt and fast service at reduced cost, they still have to score high on reliability front. Smaller or lesser known logistic firms, though charge less, have low penetration level, don’t offer reverse pickup facility, no transparent COD policy, and offer low service guarantee and transparency,” Bhaskar feels.
For startups, losses due to returns have been the major deterrent. As per the market estimates, about 15-40 per cent of the returns (due to delays and damage) happens due to logistics-related problems.
“As competition is rife, we understand the importance of staying ahead. But we also believe that by sticking to traditional methods and supplying quality products at competitive prices through reliable hands, one can win customers’ confidence. Customers want reliability more than anything else. If we could deliver their chosen items safely at their doorstep within a reasonable time, they are happy,” he says.
But challenges are many for logistics businesses. Though POS technology has played a major role in reducing the complexities in processing cargo at warehouses by increasing outputs and reducing human errors, physical delivery system and inefficiency in road transports coupled with complex clearance processes at check-posts still remain major impediments for the growth of logistics sector.