The Logistics sector in India: Reduced costs thanks to technology and policy changes
It is a universally acknowledged fact the cost of logistics is very high in India. Some estimates put it at about 13-14 % of the gross domestic product (GDP). Other studies have showed it could be as high as 17-18% of GDP, which is much higher than the US (9%) and Germany (8%). A study in 2016, by the Associated Chambers of Commerce in India (ASSOCHAM), titled Resurgent India, stated that the country can save $50 billion if logistics costs reduce from 14% to 9% of the country’s GDP. Reduced logistics costs would bring down prices of products and in turn, boost sales.
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In July 2017, the Allocation of Business Rules of 1961 was amended, to create a new logistics division under a special secretary-ranked officer in the Ministry of Commerce and Industry, Government of India. Currently, logistics is being handled by at least seven ministries — Railways, Road Transport and Highways, Shipping, Civil Aviation, Commerce & Industry, Finance, and Home Affairs. The Finance Ministry’s approval of its proposal to grant infrastructure status to the logistics sector is being counted as logistics division’s first achievement. The grant of infrastructure status to logistics means the companies associated with the sector will now get access to cheaper and long-term loans. The new division is working to set up a digital platform for the logistics industry, government departments and ministries and regulatory bodies. The division is likely to map out the most cost-and- time-effective modes across India through a digital platform. This is one of the major initiatives taken by the government to make the logistics sector more competitive.
Another major initiative which would change the logistics dynamics in India is DMICDC Logistics Data Services (DLDS), a joint venture between the Government of India represented by National Industrial Corridor Development and Implementation Trust (NICDIT) and Japanese IT major NEC Corporation. They have launched a pan-India operation of their Logistics Databank (LDB) service.
LDB service is a one-of- its kind Indo-Japanese technology partnership that provides easy-access single window digital visibility solution to streamline container logistics operations. After successful implementation at ports in the western corridor including JNPT, India’s biggest port, the service is now being expanded to three ports in the southern corridor —Krishnapatnam, Kattupalli and Ennore— and a new terminal of JNPT, Bharat Mumbai Container Terminal Private Limited. LDB is an internet of things (IoT), big data and cloud-based solution implemented by DLDS. It uses RFID technology to provide near real-time visibility of container movement in the western corridor through the portal.
The LDB provides users a single window interface to check the location of the container along its entire journey, from ports to internal container depots (ICDs) and container freight stations (CFS), with complete trace-back information on intermediate points crossed and time taken.
Since its launch in July 2016, the LDB has provided visibility to millions of EXIM containers along the western corridor. An analysis by the DLDS shows that when compared to June this year, the lead time for truck routes has improved by 25-27%. LDB provides detailed analysis of dwell time, average delivery time, efficiency of different port operators, CFS/ICD and toll plazas that are helping identify bottlenecks across the supply chain. The data published by LDB Analytics report has helped in improving the dwell time of the ICDs by 18-20%, which means goods are moving around faster and delays are being reduced.
LDB provides the visibility and transparency of the container movement by covering its entire movement through rail or road, right till the ICDs and CFSs. This service integrates the information available with various agencies across the supply chain to provide detailed real-time information within a single window. LDB can be billed as a major ease-of-doing business initiative aimed at boosting India’s foreign trade and ensuring greater transparency. Just like the manufacturing cost borne by any manufacturer, which is passed on to the common man in the country, LDB is going to help boost sales for those manufacturers who manufacture 100% indigenous products in the country as well as those products of which certain parts come from oversees. LDB is going to lead to a lot of transparency which is also going to provide visibility. This is going to convert to cost and manufacturing efficiencies and which will then convert to performance bench-marking and monitoring. In turn, this will lead to healthy competition. When the competition is healthy, the cost of production or cost of products is going to go down. If the cost of products go down, consumption will increase and the economy will improve. Therefore, they are all interlinked. This is bound to have happened and it is good to see it finally translating into action on the ground which will lead to the larger good for the country.
- TradeBriefs Bureau -