How can automation transform India’s logistics sector

In today's fast-paced business environment, the logistics industry is under immense pressure to deliver goods quickly, efficiently, and accurately. Automation in logistics is emerging as a game-changer, leveraging advanced technologies to streamline operations, reduce costs, and improve overall performance.

In addition, the McKinsey Global Institute estimates that the transportation and warehousing industry has the third-highest potential for automation among all sectors. However, the report also indicates that most logistics companies must embrace automation. While there are factors encouraging companies to automate, there are also opposing factors suggesting they should proceed cautiously.

Understanding logistics automation
Logistics automation involves leveraging technology and machinery to improve different areas of the supply chain, such as warehousing, transportation, and inventory management. It helps businesses streamline repetitive tasks, cut labour costs, and improve precision. Automation solutions can vary from basic barcode scanning systems to advanced artificial intelligence (AI) and machine learning (ML) technologies.

How is automation changing logistics in India
Automation is changing job roles and creating new opportunities in India's logistics sector while impacting traditional positions.

During an exclusive interview with Indian Transport & Logistics News, Saahil Goel, MD & CEO of Shiprocket, said, "Automation is transforming the nature of jobs in the logistics sector, leading to a shift from manual labour to more technically skilled roles. While some manual jobs may be reduced, new opportunities are emerging in managing and maintaining automated systems."

Goel also mentioned that companies are taking measures to upskill the workforce, including training programmes focused on technology and data management skills and partnerships with educational institutions and government initiatives to provide relevant training and certification.

In a recent interview, Nikhil Agarwal, President of CJ Darcl Logistics Limited, emphasised the importance of collaboration and government involvement in upskilling. Agarwal stated, "Collaboration with educational institutions is crucial for developing specialised courses aligned with the skills needed in an automated logistics environment. Government initiatives further support these efforts by promoting skill development and ensuring policies that facilitate technology adoption while safeguarding worker interests."

 "Collaboration with educational institutions is crucial for developing specialised courses aligned with the skills needed in an automated logistics environment.”
Nikhil Agarwal, CJ Darcl Logistics

Adding more light to the scenario, Prediman Koul, Chief Executive Officer, Jeena & Company, said, "For India, the strategic integration of automation is imperative to sustain and enhance its competitive edge in the global market. By leveraging these innovations, Indian logistics companies are setting new standards for operational excellence. This technological advancement positions India's supply chain capable of adapting to future challenges."

Koul pointed out the potential impact of automation on logistics across different industries. In automotive logistics, robotics and AI could enhance storage and assembly line processes. Meanwhile, precise inventory management and real-time tracking will benefit pharmaceutical logistics. E-commerce logistics are expected to improve order fulfilment and last-mile delivery through AI-driven route optimisation and autonomous vehicles. Lastly, retail logistics could see improvements in inventory replenishment and forecasting.

Why Indian logistics companies need automation
Shiprocket's Goel suggests that AI, machine learning, and robotics can make India's logistics more efficient and cost-effective. These technologies can optimise routes and automate warehouse tasks for faster deliveries and lower costs.

 "AI, machine learning, and robotics can make India's logistics more efficient and cost-effective.”
Saahil Goel, Shiprocket

Explaining the impact of automation technologies Goel said, "For example, AI can analyse traffic patterns and road conditions to find the most efficient delivery routes, reducing delivery times and fuel costs. Machine learning algorithms can forecast product demand, helping logistics companies optimise inventory levels and prevent stock outs. In warehouse automation, robotics streamlines operations and minimises manual errors, increasing accuracy and speed."

Zaiba Sarang, Co-founder of iThink Logistics, also mentioned, "Robotics in warehouses speed up sorting, picking, and packing processes, reducing human error and labour costs. These advancements collectively enhance efficiency and cost-effectiveness, driving significant improvements in the logistics chain."

 "Robotics in warehouses speed up sorting, picking, and packing processes, reducing human error and labour costs.”
Zaiba Sarang, iThink Logistics

So, what are the top benefits of using automation in logistics?

1. Increased efficiency:
Automation significantly speeds up logistics processes. Automated systems can handle tasks such as sorting, picking, packing, and shipping much faster than human workers. This acceleration leads to quicker turnaround times and higher productivity levels, allowing businesses to meet customer demands effectively.

2. Improved accuracy:
Human errors in logistics can lead to costly mistakes, such as incorrect shipments or inventory discrepancies. In contrast, automated systems perform tasks with high precision and consistency. This reduces the risk of errors and ensures that goods are accurately tracked and delivered.

3. Cost reduction:
One of the most compelling benefits of automation is cost savings. By reducing the need for manual labour, businesses can lower staffing costs and overheads. Automated systems also help minimise waste and improve resource utilisation, increasing profit margins.

4. Enhanced customer service:
Automation enables faster and more reliable service, crucial for maintaining customer satisfaction. With automated inventory management and real-time tracking, businesses can ensure timely deliveries and inform customers about the status of their orders.

"Automated systems can provide high precision to customer service and inventory management operations. This enables businesses to react more quickly to market and client needs changes. Using these systems reduces expenses and improves service dependability, which is essential for maintaining a competitive edge in the fast-paced logistics industry," said Nishith Rastogi, founder and CEO of Locus.

"Automated systems can provide high precision to customer service and inventory management operations.”
Nishith Rastogi, Locus

Top five logistics automation strategies

1. Warehouse Management System (WMS):
A Warehouse Management System (WMS) is software designed to streamline and organise warehouse operations by automating tasks such as receiving, put-away, picking, and shipping. It leverages technologies such as conveyor belts, robotic pickers, and Automated Storage and Retrieval Systems (ASRS) to accelerate the movement of goods, minimise errors, and free up workers for more intricate tasks. Real-time inventory management capabilities ensure consistent availability of goods, ultimately leading to improved customer satisfaction.

"Automation has replaced manual labour with robots in warehouse management, increasing speed and accuracy. Inventory management has become more precise through real-time tracking and data analytics, reducing stock discrepancies. Automated sorting systems have enhanced delivery accuracy and speed. These changes have led to tangible benefits such as reduced operational costs, faster turnaround times, and improved customer satisfaction," added Sarang.

2. Transportation Management System (TMS):
A Transportation Management System (TMS) automates various aspects of transportation operations, such as carrier selection, load planning, and shipment tracking. Using TMS software, businesses can reduce transportation costs, enhance delivery times, and improve supply chain visibility. One key benefit is the ability to set rules for automated carrier selection based on factors like item size and delivery location, which is especially beneficial for micro-fulfilment centres.

3. Autonomous vehicles:
The rise of autonomous vehicles is transforming the field of logistics. These self-driving trucks, drones, and delivery robots operate without human intervention, resulting in cost savings, improved safety, and round-the-clock efficiency. This technology has already made waves globally, with examples such as Aramex's drone and robot deliveries in Dubai and Wayve's autonomous vehicle trials in London for grocery deliveries.

4. Predictive analytics:
Predictive analytics uses historical data, machine learning, and statistical analysis to forecast demand, optimise inventories, and enhance supply chain efficiency. By analysing data such as shipment volumes and customer behaviour, companies can allocate resources more effectively and anticipate potential issues. Predictive analytics enables proactive problem-solving and improves profitability by allowing businesses to operate with leaner inventory and staffing levels while meeting customer demands.

5. Robotic Process Automation (RPA):
Robotic Process Automation (RPA) uses software robots to automate tasks such as order and invoice processing, inventory management, and shipment tracking. RPA reduces errors, improves accuracy, and increases productivity, allowing workers to focus on more complex tasks. This technology is set to transform logistics by driving process automation and enhancing efficiency.

Talking about the benefits and latest advancements, Koul said, "We have recently launched J5, an in-house advanced freight forwarding and customs clearance platform. Implementation is happening in phases, taking a one-line function at a time to ensure the process settles down well and users are fully trained about it. Integrating AI into processes within Jeena has reduced internal process time by around 30%."

 “Integrating AI into processes within Jeena has reduced internal process time by around 30%."
Prediman Koul, Jeena & Company

Challenges of implementing automation
McKinsey research estimates that globally, investment in warehouse automation will see the slowest growth in the logistics sector, at around 3 to 5% per year through 2025. This growth rate is about half of what is expected in the customer sectors of logistics companies, such as retail and automotive (6 to 8%) and pharmaceuticals (8 to 10%).

Although the benefits of logistics automation are evident, the implementation of these technologies presents its own set of challenges:

1. High initial costs:
Investing in automation technology requires substantial capital. For instance, a smart warehouse facility can cost anywhere from $1 million to $25 million, depending on the complexity of the systems installed. Therefore, businesses must thoroughly assess the return on investment (ROI) before making such financial commitments.

2. Job displacement:
Automation can displace human jobs, so companies should consider the social and ethical implications and plan for workforce transitions by reskilling employees for new roles alongside automated systems.

3. Integration complexity:
Integrating new automation tech with existing systems can be complex for businesses. They must ensure compatibility with current infrastructure and seamless communication with supply chain components.

4. Hesitation due to market dynamics:
Despite the potential benefits of automation, logistics companies are hesitant to make significant investments. According to McKinsey's research, the growth of investment in warehouse automation in logistics is expected to slow down. This cautious approach is attributed to various factors, such as uncertain returns and the competitive challenges posed by influential e-commerce companies.

5. Technological uncertainty:
With over 50 emerging technologies that could further automate parts of the supply chain, logistics companies face the challenge of determining which technologies will provide the best return on investment. The rapid pace of technological advancement makes it difficult to predict which innovations will become industry standards.

6. Frenemies and 'Coopetition':
The logistics companies' relationship with major e-commerce players is complex. E-commerce companies have significant buying power and can switch to competitors if unsatisfied, keeping prices low and discouraging heavy investment in automation. Additionally, giants like Amazon have developed their own logistics networks, often leaving traditional logistics companies with low-margin services.

7. Seasonal demand fluctuations:
E-commerce demand is highly seasonal, peaking during events like Christmas and Singles' Day. Logistics companies must build significant spare capacity to handle these peaks, which can lead to underutilised resources for much of the year. If they fail to meet peak demand, e-commerce companies will likely develop their own logistics solutions, reducing the market for traditional logistics providers.

Shiprocket's Goel discussed the challenges that logistics in India encounter when integrating automation into their supply chains, such as high initial investment, technological complexities, and a shortage of skilled workers. However, he also suggested that companies can surmount these obstacles by investing in training and upskilling programmes for their workforce, taking advantage of government incentives, and progressively implementing automation technologies to control costs effectively.

"E-commerce enablement platforms also effectively help them overcome the challenges associated with integrating automation into their supply chains through cost-effective, scalable, and easy-to-integrate solutions that enhance operational efficiency and drive growth in the logistics sector," added Goel.

The way ahead
The logistics industry is rapidly transforming through automation, offering benefits such as improved efficiency and cost reduction. However, implementation comes with challenges, including high costs, job displacement, and technological uncertainty. Companies can adopt strategies like WMS, TMS, autonomous vehicles, predictive analytics, and RPA to stay competitive. Staying informed about the latest automation trends and technologies is essential for success as the industry evolves.