CHALLENGES FACED IN LOGISTICS SECTOR IN INDIA : The road transport in India as emerged as a dominant part of the transport system in India, it has come to occupy a pivotal position in the overall transport system in India. The sector is growing at the rate of 10% per annum. Several factors are helping the growth of logistics industry in India over the decade that includes changing tax system, rapid growth in industries such as automobile, pharmaceuticals, FMCG and retail. However, major sectors that are investing huge amounts in logistics industry are aviation, metal & mining and consumer durables. With increasing competition and cost, focus on outsourcing, entry of foreign players is having positive impact on the industry. Three major contributors for the growth of the logistic industry are: emergence of organized retail, increase in foreign trade and India becoming soon the manufacturing hub. The Economic liberalization and the relaxed FDI norms have been a tremendous help in the growth of the sector. Other factors that have helped are augmentation of retail, agriculture, pharmaceutical, automobile and FMCG sector. The introduction of Value Added Tax (VAT) and the proposed introduction of a singular Goods and Services Tax (GST) are expected to significantly reduce the number of warehouses manufacturers are required to maintain in different states, thereby resulting in a substantial increase in demand for integrated logistics solutions. Infrastructure is one of the biggest challenges faced by the Indian logistics sector and has been a major deterrent to its growth. Infrastructural problems like bad road conditions, poor connectivity, inadequate air and sea port capacities and lack of development of modes of transports like railways and alternates like inland water transport and domestic aviation have been constant irritants. Due to the infrastructural bottlenecks costs per transaction in Indian logistics sector is very much high compared to those in the developed markets. Less economy of scale due to high fragmentation of industry, lack of skilled labor and manpower are also one of the major challenges for the logistic sector. Indian subcontinent faces different challenges vis-a-vis developed nations. In foreign countries the problem is demand; in India, demand management has been a great challenge. India still has a long way to go in terms of best practices. Maturity level of most of the companies on demand driven value network is low. DDVN is essentially about being customer centric. Apart from the above-mentioned points, the key challenge is the lack of human resources followed by infrastructure in terms of logistics, power, and water. The other challenge which exists in a vast country like India is that the customer base is diverse and widely distributed. The point I am making is that the real growth which will occur in India is from rural areas and remote locations. For companies to win over the Indian market which is huge, they need to have right end-to-end supply chain strategies in place, covering network strategy, proper human resources, and infrastructure. The other key challenge is volatile demand, needs and preferences consumers, and customers are changing rapidly, hence creating uncertainty in the demand patterns. The transportation market in India is expected to continue offering significant opportunities to all concerned stakeholders. However, for the sector to reach its full potential, the timing and economics would depend on how the various drivers and inhibitors evolve in future. While the quality of road infrastructure is certainly likely to improve, the pace of infrastructure development is critical to minimize losses, both economic and environmental. In particular, delays in meeting project timelines should be minimized, given that only around 52 percent (10.39 km as against the target 20 km in 2011–12) of the daily target of average road length to be constructed has been met. However, not only has the demand for road connectivity been rising, focus on improving basic road infrastructure as well as technology adoption has also increased in recent years. The number of expressways and highways has increased; many roads have been widened; electronic toll collection is becoming increasingly common; the ‘green channel’ concept is gaining ground, and inter-state check posts are becoming automated, with Gujarat serving as an example. In terms of overall business outlook, India has an opportunity; it’s just that after the downturn, in line with the global markets, the emerging markets like India and China are also getting stabilized at a new normal which will be slightly at the lower level vis-à-vis what the country used to grow at. Comparing India with other emerging markets, the per capita GDP is low but there is a lot of potential.
Posted on: Fri, 12 Jul 2013 14:57:35 +0000
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