e-Commerce plays vital role in logistics sector

It is important for material handling, warehousing, packaging, supply chain management, procurement, and customs service throughout the nation. Growth of the sectors holds potential for generating employment, says Abhijit Verma, Executive Director & CEO, Avigna Group.

In a developing economy such as India, warehousing and logistics industry can be a major game changer. According to the Report ‘Warehousing Market in India 2021’, the market was valued at  1,050 billion in 2020 and expected to grow at a compound annual growth rate (CAGR) of 14.86 per cent between 2021-2025, to reach a value of  2,028.86 billion by 2025, something that can be a blessing in disguise for India and its economy.

The expansion of e-Commerce in the tier-2 and tier-3 cities is playing a pivotal role in the growth of the warehousing and logistics sectors. This upward trajectory holds potential for enhancing job opportunities for skilled people thus solving one of the major problems of India — unemployment. If the country has to witness success and economic growth, it has to give priority to its logistics sector.

The logistics sector is responsible not only for employment generation, but also for generating direct foreign influx. Its contributions include $200 billion addition to the economy and jobs to around 40 million people. Its macro contributions do not stop here, since the industry takes the responsibility of connecting numerous markets, businesses, and suppliers. It has been important for material handling, warehousing, packaging, supply chain management, procurement, and customs service throughout the nation.

COVID-19 impact

The pandemic outbreak has seen industries weakening throughout the world. India too has gone through a difficult phase so much so its economic growth has been effected. The logistics industry has come as a saviour for many businesses, overall growth and economy. The pandemic resulted in labour shortage and curbs on goods’ movement. The frequent lockdowns and additional limitations carrying from region by region created an adverse effect on the e-Commerce, warehousing and logistics networks.

However, the industry’s progress has been encouraging, since it continues to expand technologically and looks forward to a bright future. There have been changes in the logistics business, such as changing customer preferences and other government reforms that are currently expected to drive the industry to the next level.

COVID-19 created an increased demand for essential items, such as food, pharmaceuticals and groceries. The logistics companies have served these demands well while adhering to the safety norms. This shows the need to have the industry growing to ensure growth even during such difficult times.

Furthermore, it has helped the micro, small and medium enterprises (MSMEs), aligned with the self-reliant movement of the government and supported small sellers who wished to take their businesses to the online platform. These sellers could increase their customer base with the logistics sector’s one-stop fulfilment solution. Logistics companies are regarded as the employment-generating sector for the country.

Future of the industry

For a long time, Indian supply chain industry followed traditional and obsolete practices. However, the nation has come a long way and is fast emerging as an important hub for the supply chain sector globally. The e-Commerce boom and influx of investments from private players have taken the industry to the next level. In the last couple of years, the government has also taken several initiatives and launched many programmes to strengthen the logistics sector of the country. The government is known to have approved proposals for building 35 multimodal logistics parks as part of Bharatmala programme for a long time — the flagship highways development project. Under the programme, the government has started developing elevated corridors, bypasses and ring roads to ease traffic congestion caused by heavy vehicles.

Besides, the government is seen encouraging private participation through PPP model which is expediting the process of setting up of Logistic Parks across the country. Prime Minister Narendra Modi’s national infrastructure masterplan — Gati Shakti — is another project that will lay the foundation for a holistic infrastructure development, help local manufacturers, and generate job opportunities.

Furthermore, there has been an increase in export and import as rise in manufacturing across the country driven by the government initiatives such as ‘Make in India’ and ‘Atmanirbhar Bharat’. India has all the potential to emerge as a manufacturing hub beating China in the long run. By re-planning the global supply chain strategies, India definitely can capture the lion’s share of the world’s manufacturing demand.

Though India’s entry is late in the modern supply chain industry, we are learning the ropes of the trade. The role of technology is helping the sector catch up with the globally accepted standard. The industry is still evolving in its digital transformation journey in the post-pandemic period, which saw companies re-strategize their global supply chain models.

IoT, Big data, Robotics, Automation, AI, Machine Learning and Analytics, 5G, Blockchain, Cloud Computing are some the technologies to look forward to in the supply chain industry. Adapting to these technologies can help reduce costs and lead to better transparency in information flows and better analysis of data.

India is expected to compete better with the warehouse and logistics sector, when it comes to last-mile delivery, being an attractive investment destination and enhancing manufacturing export performance. The sector has the ability to influence social life of farmers and support low-wage workers.