Bridging the gap – What modern technology means for logistics

Digital technologies have advanced more rapidly than any other innovation in history, having become nearly ubiquitous today. Studies predict a 45% increase in the number of active Internet users in India in the next five years and, with there being 622 million Indians online already, the society is steadily edging towards digital connectivity being a necessity instead of a luxury. As part of the Digital India initiative, many transformative digital platforms have come up rapidly – UMANG, GSTN and BHIM-UPI to name a few – all with the aim of creating digital security and trust amongst Indians. As the platforms gained greater traction in recent years, this led to a rise in on-demand consumerism. Looking back on the last few years, the preferences and expectations of the average Indian consumer has shifted drastically in response. 

Changing the way we pay

A key success story pertaining to the technology revolution in the country over the past 5 years has been digital payments, with India firmly establishing itself as one of the global leaders in financial technology. UPI is one of the flag-bearers of this transformation, along with the rise of payment gateways, facilitating seamless payments. When UPI was initially launched, the total number of UPI payments was 6% compared to 36% card payments. However, in FY 2021, UPI’s share expanded to 63%, while the percentage of card payments shrunk to 9%. That too with a massive reach – it is estimated that India’s digital payment volume has climbed at an annual average rate of around 50% over the past five years. This success story has had direct repercussions on the logistics industry, easing payments across the logistics lifecycle, both for consumers and logistics suppliers.

The untapped potential of the logistics industry

India’s logistics sector is massive, accounting for around 14% of our GDP, and is expected to grow from around $250 billion in 2021 to around $380 billion in 2025, growing at a compounded annual rate of 10-12%. Furthermore, more than 90% of the logistics sector is unorganised 90% of the logistics sector is unorganised, including the likes of small owners (fleet size less than 5 trucks), brokers or transport company affiliates, small-scale warehouse owners, freight forwarders, and more recently the gig workforce. And, as with any large unorganised play, comes a huge opportunity for technology to make an impact. We have seen this more noticeably in the last-mile sector in recent years.

One of the biggest challenges in the current unorganised logistics sector is scalable match-making between the consumer and the transporter at efficient costs. The challenge is with the long tail of SME and retail consumer use cases (beyond the enterprise use case), which were classically solved through small brokers and transporters with limited reach and speeds. This model is not cost-sustainable at large scales. 

The evolution of logistics 

Modern age platforms have been able to ensure that these transporter networks are digital, immediately available and come without limitations on reach or access. One of the key success stories here is the on-demand intra-city last-mile logistics model. This model has lower ticket sizes due to shorter distances, and, in order to be sustainable, it demands highly efficient match-making costs on the back of seamless discovery, allocation and shipping. And some of the new-age technology platforms are doing a commendable job at this, which directly translates to massive improvement in vehicle utilisation, higher earnings per transporter vehicle, and savings for the customer.

The impact of eCommerce 

The past decade has seen a rapid rise of e-commerce and on-demand consumerism, which has directly influenced the logistics industry, putting high standards on ad-hoc, timely and speedy delivery, causing significant shifts in first-mile, middle-mile and last-mile delivery. This has led to the rise of notions like dark stores and the 2-wheeler gig worker, which were almost non-existent before. We now have an entire industry around the 2-wheeler gig worker, which is a massive long tail workforce, and key technology interventions around onboarding, tracking, payments, etc. has allowed this industry to hit unprecedented scales today. Also, e-commerce is only going to accelerate its growth in the future, thanks to the advent of direct-to-consumer commerce. This allows small businesses to reach a wide audience digitally and sell their products. It will be quite compelling to see how the logistics industry reacts to this change.

The influence of Government intervention 

The Government of India has also invested heavily in India’s logistics sector, with a vision to build an integrated, seamless, effective, dependable, green, sustainable and cost-efficient logistics network that makes use of best-in-class tools, procedures and qualified personnel. And one of the key policies it has introduced in this direction is the National Logistics Policy (NLP), which aims to reduce the logistics cost, from 14% currently to 9-10% of the GDP. Technology initiatives like the United Logistics Interface Platform (ULIP) form a key backbone of the NLP, using a rich database of information related to logistics and resources available with various Ministries to provide functionalities like driver and vehicle verification, consignment tracking, route planning, inventory management, etc.

What the future holds 

In conclusion, these are very promising times for the logistics landscape in the country, with the rapid rise of consumerism putting higher demands on logistics at sustainable costs. And technology is playing a very crucial role in solving this problem, aiming to address reach, discovery, inventory management, shipping, tracking, payments, etc. at large scales and efficient costs. This has seen the advent of many new-age technology-based logistics organisations and is also seeing significant investment by the government through policies and initiatives like NLP and ULIP. It would be very interesting to see how this industry evolves and adapts further over the coming years