Indian logistics industry to experience higher investments: Frost & Sullivan

August 17, 2017– The Government of India’s strong emphasis on manufacturing and initiatives such as “Make in India” is boosting domestic production, which is bolstering the logistics industry, says Frost & Sullivan’s report named ‘Indian Logistics Industry - Growth Insights and Forecast to 2020’.

Logistics companies are making concerted efforts to keep pace with this growth in demand by digitizing their solutions and offering online freight services. These services will provide visibility across the supply chain and transform it into an organized industry. Some of the advanced technologies adopted include automated storage and retrieval systems (ASRS) in warehouse and transportation, radio frequency identification (RFID) in place of bar codes, and global positioning system (GPS) for real-time tracking.

“In addition to riding the digital wave, logistics companies in India are strategizing for the transition from indirect taxation to goods and service tax (GST). The simplified tax structure will benefit the warehousing industry and reduce logistics costs by upto 2.5 percent,” said Senthil Kumar Subbiah, research analyst, supply chain & logistics transformation practice, Frost & Sullivan. “This tax reform, along with land and labor market reforms, will improve the efficiency of both transportation and freight forwarding.”

The report is part of the Supply Chain & Logistics Transformation team’s Growth Partnership Subscription. According to the study, investments in infrastructure development across all modes of transportation, relaxed foreign direct investment regulations, implementation of GST, and increased technology adoption are altering the Indian logistics industry.

Meanwhile, the increasing influx of international logistics service providers (LSPs) are prompting third-party logistics (3PLs) and domestic LSPs to expand their footprint and focus on transportation service, warehousing and freight forwarding. It will also open up opportunities for partnerships, and domestic logistics companies will have access to the modern technologies introduced by global service providers. Logistics services in India will greatly benefit from the development of transportation and logistics-related infrastructure, such as dedicated freight corridors, logistics parks, free-trade warehousing zones, port modernization, and container freight stations.

“Another major influence on the logistics industry is the ubiquity of smart phones and internet, and the consequent rise of e-Commerce. As more than 30 percent of the Indian population resides in tier II and tier III cities, e-Commerce sites receive more orders from these cities,” noted Subbiah. “To provide better services to customers, e-Commerce firms are demanding bigger and more efficient warehouses, faster delivery options and improved last-mile connectivity, which translates to a plethora of business opportunities for 3PL companies and logistics startups.”

Overall, LSPs are leveraging technologies such as Big Data and cloud-based application platforms for better order fulfillment and tracking of shipments. The modernization of logistics infrastructure and government support will go a long way in advancing the Indian logistics industry.