Praveen Vashistha, Founder & Director, Gxpress, talks about the effect of lockdown on the supply chain management companies and change in the scenario of logistics industry post COVID-19 to boost the economy.
The COVID-19 pandemic has brought the business world to a standstill. The virulent disease has spread across the globe at a rapid pace, disrupting and debilitating entire industries in its wake. India too is witnessing its share of the viral onslaught and has since effectively imposed a
nationwide lockdown to arrest the further dissemination of the lethal disease. The logistics industry has been on the frontline since the beginning of the unprecedented crisis, ensuring that the supply chains remain intact. Since the manufacturing industries were severely hit due to the shortage of labour and the restrictions being imposed on the movement of goods and businesses, the supply has been disrupted. The logistics industry provides significant macro contributions to the national economy by creating employment and generating foreign investment influx. It currently contributes more than $200 billion to the economy and employs more than 40 million people. Thus, it holds critical importance as it connects various markets, suppliers and business areas like material handling, warehousing, packaging, supply chain management, procurement, and customs service dotted across the country.
Impact of lockdown on logistics sector
The immediate impact of the pandemic on the logistic sector has been a sharp fall in freight availability due to restrictions on production of non-essential goods, and shortage of fleet for movement of goods owing to dearth of drivers and consequent spike in truck rentals and air freight prices. According to the Indian Chamber of Commerce (ICC), during the lockdown the logistics sector has lost about Rs 50,000 crore which has also disrupted the business cycles and supply chains. More than nine per cent of the shipments were stuck, 21 per cent of the orders were delayed and delivery percentage has seen a clear decline of 19 per cent, forcing the logistics sector to face the brunt of the crisis.
During the early stage, customers begin to ship more goods in anticipation of stronger business conditions. Rapid decrease in logistics demand signals the beginning of an economic slump. Also, logistics has a strong role to play in the key economic indicators including GDP and unemployment. When the lockdown is lifted gradually and muted, the recovery in industrial activity, the logistic sector, including warehousing, is likely to witness sharp demand contraction in the near-term.
Role of logistics sector to revive the economy
According to the reports of the Economic Survey, the country’s logistics industry is expected to touch US$ 215 billion by the end of 2020, growing at a CAGR of 10.5 per cent. It provides employment to more than 22 million people. Rapid and technological advancements in digital technologies, changing consumer preferences due to e-commerce, government reforms, and shift in service sourcing strategies are expected to lead the transformation of the Indian logistics ecosystem. In the new normal, technology has proven its utility and adaptability. Strong market trends towards the e-commerce segment continue to transform how brands and consumers interact. The pandemic has brought an increase in the demand of essential items such as groceries, food, and pharmaceuticals. Many logistics companies cater to this demand whilst adhering to safety protocols with OTP-based contactless delivery of items. Leveraging state-of-the-art technology, logistics aggregators should focus on increasing the efficiency of services and optimising cost.
Another method adopted by logistics aggregator brands, is to help the MSMEs and align with the government’s self-reliant movement. For small-sellers who want to take their business online and increase their customer base, logistics aggregators have become the one-stop fulfilment solution. With automated warehousing and packaging services, they should ensure that there is minimal weight discrepancy and a seamless post-order experience.
According to the National Skill Development Corporation (NSDC), the logistics sector has emerged as the top employment-generating sector in India in the aftermath of the coronavirus disease. Logistics companies should design a strategic plan to prove its resilience and dynamism by helping the exporters and SMSEs to showcase their products overseas. This will help the MSMEs to revive production in full swing which will turbocharge them to shift to e-commerce completely. This is the time when companies shall assess their supply chain risks and proactively develop mitigation plans such as exploring alternate channels of transportation or combination of small trucks, three-wheelers, two-wheelers etc. for last-mile essential goods delivery.
Government’ role in logistics segment
The government is introducing measures under the ‘Atma Nirbhar Bharat’ and ‘Made in India’ mission so that micro, small and medium enterprises (MSMEs) are back on track as they contribute to a one-third of total economy. It is also helping by engaging with stakeholders involved in the delivery of essential services, e-commerce players in B2B and procurement domains which have been left stumped. RBI has also announced a moratorium on term loans, put off interest payment on working capital facilities and eased working capital financing. While these measures have given hope to the logistics sector, there are a few more initiatives that the government should take to provide aid to the ailing logistics industries, such as, delay MSME loan repayment or extended tenure, an exemption in GST, subsidised warehouse or inventory management facilities, measures to mitigate the impact on MSME labour workforce, enhance access to credit and defer utility and social security payments.
Digitalisation will play an important role in the efficiency and performance in freight management and port operations. Automation in warehouse will help achieve operational efficiencies to counter supply-chain cost pressures in the industry. Growth in the investment in infrastructure, last-mile connectivity, and emerging technologies are streamlining the logistics landscape in India. The country’s GDP is expected to reach at about $3.02 trillion in 2021, representing about four per cent of the global GDP. Strong growth supported by government reforms, transportation sector development plans, growing retail sales, and the e-commerce sector are likely to be the key drivers of the logistics industry in India.
To sum up, India’s success and economic growth in the future is heavily dependent on the evolution of its logistics sector. This is essential not only for generating employment or providing broad social benefits to farmers and low-income workers, but also for competing with the rest of the world in terms of last-mile connectivity, efficient transportation, time of delivery, etc. This will give an overall boost to India’s image as an attractive investment destination and facilitate India’s manufacturing export performance.