Key challenges to adopting technology include high upfront costs, limited digital literacy and lack of skilled workforce. Many small businesses operate with legacy systems and informal processes, making integration of new technologies risky. Concerns about ROI, cybersecurity and potential disruptions contribute to the cautious approach. Without targeted support, the pace of technology adoption remains slow and uneven.
Ritika Arora Bhola
Considering the plethora of benefits technology offers to streamline logistics and supply chain operations, the logistics sector is still under pressure to digitise, especially MSMEs, who are hesitant to adopt technology due to reasons such as high-cost, traditional mindset, lack of knowledge and constant investments and upgradations.
This reluctance stems from economic, cultural and infrastructural factors that continue to shape the sector’s approach. AI, IoT, Blockchain, ML, Data Science, robotics and automation have transformed the way the logistics sector operates and improved EoDB in India.
The Ukraine-Russia war, Iran-Israel conflict and global slowdown have made it mandatory for the logistics firms to invest in technology to survive. From AI-driven route optimisation in multimodal logistics to robotics in warehouses and real-time shipment tracking through IoT are reshaping global supply chains.
The past few years have witnessed the emergence of tech-startups offering performance-based apps for air cargo and logistics sectors. Several logistics players, including MSMEs, remain hesitant in adopting these solutions in tier II and III cities.
Cost barrier
One of the primary reasons MSMEs in logistics shy away from adopting technologies is the high cost of implementation, according to reports. Systems such as warehouse automation, WMS, AI analytics tools, Block Chain for supply chain transparency, advanced transportation management software and GPS, require upfront investment. For large logistics corporations, these costs may be justified by long-term gains in efficiency and productivity. For MSMEs operating on thin profit margins, such investments seem risky or unaffordable. Even the cost of upskilling, maintaining the systems and ensuring periodic upgrades add to the overall financial burden.
Upskilling — a challenge
In India, most of the workforce is still not tech-savvy. The sector is not ready with skilled workforce who can understand and manage technologies. There is a need to promote skilling and to understand the importance of digitalisation. Govt and private players have opened various institutions such as the National Skill Development Council and Gati Shakti Vishwavidyalaya across India to encourage youth to enter the sector. But it will take time for India to boost digital literacy. Many logistics MSMEs are run by first or second-generation entrepreneurs who are not equipped to evaluate new age technology solutions. This digital knowledge gap leads to hesitation in adopting systems when it does not promise immediate benefits.
Unorganised market structure
In countries such as India, the sector is fragmented, comprising thousands of small players many of whom function in an unorganised or semi-organised manner. These businesses often operate with minimal documentation, limited digital infrastructure and traditional business models based on trust and familiarity rather than data and automation.
Such businesses are usually not ready or unwilling to take the leap toward high-tech solutions. Integrating digital tools into unstructured workflows is often seen as a disruption rather than an enhancement.
Uncertain RoI
MSMEs are inherently risk-averse to logistics where the returns on digital investments are not immediate. Advanced technologies may offer long-term benefits, but the lack of short-term ROI makes business owners sceptical.
Another challenge is that small operators do not consider improved customer experience, data-driven decisions or process transparency critical priorities. For them, survival, cash flow and daily operations take precedence over transformation efforts for them.
Introducing new systems requires overhauling existing processes, which can lead to temporary disruptions in service. For MSMEs, a delay can have a cascading impact on customer relationships and revenue flow. The fear of such disruptions deters many from embracing change, when they are managing operations well enough using manual or semi-digital methods.
Resistance
In India, cultural inertia is an underrated barrier. Traditionally, logistics has been a people-driven business where personal networks, experience and intuition play a vital role. Changing that mindset to one where data and automation take centre stage is a slow and difficult process. Without a generational shift, many prefer sticking to what they know best — even if it is less efficient.
Cybersecurity
Concerns regarding data privacy and cybersecurity have grown. MSMEs often lack the expertise to understand or mitigate these risks. The fear of data breaches, system hacks or losing sensitive business information prevents many from going fully digital.
Limited ecosystem
While governments and industry associations have launched programmes to support digital transformation, many MSMEs find these schemes inaccessible or generic.
The government has launched many digital initiatives, such as ULIP, LDB, Digital Public Infrastructure, National Logistics e-marketplace, FASTag and Freight Greenhouse Gas Calculator. But without tailored support, financial incentives or handholding, small logistics businesses find it quite challenging to take the first step.
Shortage of talent to manage solutions
Amit Maheshwari, Founder and CEO, Softlink Global
Despite the buzz around AI and IoT in the logistics sector — including MSMEs, the barrier in embracing technology is not just costs, but perceived costs. MSMEs fear high upfront investment without ROI, overlooking long-term gains such as process efficiency, visibility or data-driven decision-making. The industry’s fragmented nature and legacy mindset slow down adoption. Many still use disconnected systems for operations, billing and compliance, leading to revenue leakage and inefficiencies. There is a knowledge gap. While owners often lack exposure to emerging technology, there is a shortage of skilled talent to manage the solutions.”
Fear of losing control makes MSMEs wary
Balagopal Balachandran National Head, Air Freight FEI Cargo
Discussions around tech adoption in the logistics sector, especially MSMEs, revolve around cost and capability. There lies the human barrier — the fear of losing control. Decisions are made not by data dashboards, but by people who know their trade inside out. In such environments, introducing tech doesn’t feel empowering, but like abject surrender. If a machine is calling the shots, what happens to the wisdom of decades? This hesitation is amplified by a fragmented supply chain, ROI and outdated legacy systems and leaves many caught in the day-to-day grind of
prioritising survival over transformation.”
MSMEs shy away from adopting tech due to costs
Parvinder Singh, Managing Director, Hans Infomatic
The MSME sector is realising the benefits of advanced tech, but adoption remains cautious due to several barriers. High investment, uncertainty over tangible ROI and integration challenges with legacy systems deter many players. MSMEs operate on tight profit margins and view technology as a cost rather than an enabler. MSMEs seek quick benefits from technology adoption. Our solutions such as Cargo Community System, iCAFFE, SEZ compliance and WiseFleet are designed to be affordable, scalable and to demonstrate ROI early by improving efficiency, reducing errors and costs.”
Fear of operational disruptions a deterrent
Vipin Vohra, Chairman, Continental Carriers
MSMEs encounter regulatory uncertainty and fear operational disruptions during technology transitions. Resistance to change among stakeholders slows adoption. High investment costs for AI, IoT or Blockchain makes MSMEs cautious. With tight margins, these firms seek quick returns, but the longer payback period for tech investments deters decision-making, especially without clear visibility on tangible benefits. There is a gap in digital literacy within MSMEs. Limited in-house expertise, coupled with shortage of industry-specific training programmes, constraints their ability to adopt tech.”
High initial investment needed for tech adoption
Gautham R, Senior Manager, Global Air Freight Head, Air Freight India, WIZ
The barrier which we see with MSMEs on adopting AI, IoT and Blockchain is high-cost investment as they might not have sufficient allocations on their budget to implement and maintain it. Data integration from existing systems might be another challenge. MSMEs are comfortable with the process they are using. High initial investments are required for tech adoption by hiring skilled talent for implementation. But in the long run, this helps reduce manual work, making the process easy through automation and improving customer satisfaction, proportionate to ROI.”
MSMEs don’t adopt tech owing to short-term ROI
Sabari Ramnath, Director, Unisys
Many MSMEs and logistics players hesitate to adopt technology due to the misconception that tech is expensive and will eliminate jobs. They also prefer to wait for larger companies to adopt and validate new technologies, positioning themselves as late adopters. MSMEs often perceive tech as a high upfront cost without immediate ROI. This short-term view delays adoption — though many modern solutions offer affordable and service-based models. Today’s technologies are user-friendly and designed for quick adoption. The issue lies more in mindset than in skills.”
Survival and cost control barrier in tech adoption
Rajen Bhatia, Chairman, ACAAI, Western Region
Infra implementation and training costs are steep with payoffs that may take years. This high entry cost fuels perceptions of risk and delays investment. If technology can automate documentation and other processes to minimise human intervention, it could reduce expenses and make costs affordable. Owners and mid-level managers often lack exposure to AI, IoT, or blockchain, while trained staff is scarce and expensive. MSMEs prioritise short-term survival and cost control. Without immediate gains, they hesitate to allocate capital. There are pronounced knowledge gaps and skill shortages in logistics.
