In today’s interconnected world, efficient logistics and robust supply chain management are critical components of a thriving global economy. The forward and reverse movement of goods and services across borders and continents requires a well-orchestrated network that spans various stages, from raw material extraction to final product delivery. India has emerged as a major player in the global logistics and supply chain management industry in recent years. With its strategic geographical location, rapidly growing economy, robust infrastructure, and technological advancements has emerged as a significant player in the realm of global logistics and supply chain management.
India’s logistics industry has undergone a remarkable transformation over the past few decades. The liberalization of the Indian economy in the early 1990s set the stage for increased international trade and foreign investments, which subsequently fuelled the demand for advanced logistics and supply chain solutions. With its extensive coastline, well-connected ports, and proximity to key global markets, India became an attractive destination for companies looking to optimize their supply chain networks.
The logistics and supply chain management industry in India has experienced significant growth over the years. According to the India Infrastructure Report from September 2022, the Indian logistics industry has experienced a positive trend in growth over the past few years. Despite the pandemic, the sector has demonstrated resilience and continues to thrive. In fact, it is projected that the logistics market will achieve a Compound Annual Growth Rate (CAGR) of 14.8%, resulting in a market size of $400 billion by Fiscal Year 2026 – a significant increase from the $230 billion recorded in Fiscal Year 2022. Additionally, an Ey report highlights the strong reliance of the Indian logistics sector on road transportation, which contributes 66% of cargo (in ton-km), followed by rail (31%), shipping (3%), and air (1%).
Despite progress, the freight transportation sector in India continues to face mode-based disparities, but efforts are being made to tackle this challenge. The ports, shipping, and logistics industry is evolving to adapt to the dynamic business landscape by upgrading infrastructure, adopting digitalization, and emphasizing sustainable logistics. Yet, it is imperative to address policy and infrastructure impediments for this transformation to be effective.
Lately, the logistics sector in India has experienced substantial progress and observed remarkable trends. These trends can be linked to diverse factors, including the government’s concentrated efforts on developing infrastructure, a growing influx of foreign direct investment (FDI) in the industry, and the ascent of e-commerce. These factors have collectively propelled Indian logistics to demonstrate its strength on the global stage and established a strong global footprint.
One of India’s key strengths in the logistics and supply chain management sector is its large and young workforce. With a population of over 1.3 billion people, India has a vast pool of talent that can be leveraged to meet the industry’s growing demands. The country’s young population ensures a continuous supply of skilled labor, which is essential for managing complex logistics operations efficiently.
India’s strategic geographical location is another advantage for the logistics industry. Situated at the crossroads of major trade routes between Asia, Europe, and Africa, India serves as a gateway to these regions. This proximity allows for efficient transportation and connectivity, making India an ideal hub for global supply chains.
Furthermore, India has made significant investments in developing its infrastructure to support the logistics and supply chain management sector. The government’s flagship initiatives, such as the Goods and Services Tax (GST) and the Dedicated Freight Corridor (DFC) project, have streamlined the movement of goods across the country. The GST has replaced multiple indirect taxes, reduced complexities, and improved transparency in logistics operations. The DFC project aims to enhance rail freight connectivity and reduce transit time, thus facilitating more efficient logistics operations.
The rapid growth of e-commerce is another factor driving the expansion of the logistics and supply chain management industry in India. With the increasing penetration of smartphones and internet connectivity, e-commerce has witnessed a boom in the country. According to a report by Morgan Stanley, India’s e-commerce market is expected to reach $200 billion by 2026. This growth has fuelled demand for robust logistics infrastructure and efficient supply chain management solutions to cater to the needs of online retailers.
However, despite these strengths, there are certain challenges that India’s logistics and supply chain management industry faces. One of the major hurdles is the lack of developed physical infrastructure in certain regions. While significant strides have been made in improving road, rail, and air connectivity, there is still a need for further investment in infrastructure development, particularly in remote and underdeveloped areas. These regions often suffer from poor road networks, inadequate warehousing facilities, and inefficient last-mile connectivity, which hampers the smooth flow of goods.
Additionally, the high logistics costs in India pose another challenge for the industry. Several factors contribute to these costs, including high fuel prices, inefficient transportation systems, and cumbersome paperwork and bureaucratic procedures. According to the World Bank’s Logistics Performance Index (LPI), India ranks 44th out of 160 countries in terms of logistics performance, highlighting the scope for improvement.
To address these challenges and unlock the full potential of the logistics and supply chain management industry, the Indian government has taken several initiatives. These include the development of multimodal logistics parks, the digitalization of trade processes, and the promotion of public-private partnerships (PPPs) to attract private investments. These efforts aim to improve infrastructure, reduce costs, and enhance efficiency in logistics operations.
A slew of policy measures such as the Gati Shakti Master Plan, National Logistics Policy, and revisions in Railways’ land use policy is poised to bring transformative changes to the logistics sector in the country. These policies aim to address challenges like high logistics costs, lack of uniform logistics policies, and inadequate multimodal connectivity. The development of multimodal logistics parks (MMLPs), including the planned establishment of 35 MMLPs under Bharatmala phase I, presents significant opportunities for investors and logistics service providers.
With the increasing concern for the environment, many Indian logistics companies have started to shift towards e-mobility to reduce their carbon footprint. This shift has helped reduce air pollution in the cities and has also provided cost-effective logistics solutions to companies.
In conclusion, the Indian logistics industry has been witnessing an exciting period of change and development in recent times and emerged as a significant player in the global logistics and supply chain management industry. With the advent of digital transformations, the logistics and supply chain management sectors are witnessing a wave of innovations and new technologies. These advancements not only streamline processes but also enhance the stability of business operations throughout the industry. In tandem with the pursuit of sustainability, the logistics sector is poised to pioneer customer-centric business model revolutions recently and in the years ahead. It is imperative to strike a balance between logistics and the environment while ensuring the profitability of operations.
As India progressively assumes its role on the global platform, the influence of its logistics industry will assuredly extend well past its borders. This success has been facilitated by pivotal supply chain participants who excel in satisfying all customer requisites, thus spotlighting the robustness of Indian logistics in the global arena and establishing an enduring impact. An exemplar in this regard is TVS Supply Chain Solutions, a premier 3PL/4PL enterprise actively contributing to the advancement of the Indian logistics sector.
TVS SCS is an India-based multinational company, that pioneered the development of the outsourced logistics industry in India. For the last 15 years, we have managed large and complex supply chains across multiple industries in India and select global markets through customized tech-enabled solutions. Our End-to-end supply chain solutions offer an integrated process framework, from procurement of raw materials, scheduling, production, storage, and then final delivery of finished product to the customer. Our emphasis is on End-to-end supply chain visibility, and we strive for improved communication across parties which is useful for exception management.