What will be the Future of Logistics Industry

The Indian logistics sector is one of the largest in the world and presents a large addressable opportunity. The sector is critical for the country’s economic growth as it connects various elements of the economy and consists of transportation, warehousing and other supply-chain solutions ranging from the suppliers to the end customers.

The logistics market is large and projected to grow sustainably for the next five years.

The Indian logistics sector is one of the world’s largest and critical for the country’s economic growth. As of Fiscal 2021, the Indian logistics market size stood at US$382 billion and is projected to grow to US$531 billion by Fiscal 2026 (Source: Chamber of Commerce – India, Report on Logistics, India Economics Survey 2017-18, 2019-20, RedSeer Estimates), driven by the following factors:

• Strong demand from manufacturing (led by the “Make in India” campaign), retail, automotive and pharmaceutical sectors, and the need for efficiency improvement in the newly created demand.
• Increasing shift of industry preferences towards integrated supply-chain services and other sophisticated solutions like inventory optimization and data analytics from isolated offerings like transportation or warehousing.
• Growth of ecommerce in India and demands for specialized needs of online delivery (amongst others, faster delivery, return management and cash on delivery).

As a percentage of GDP, India’s logistics spending is significantly higher than developed countries (refers to the United States and Europe), largely due to the high incidence of indirect spending. This is similar to China (approximately 15%) as against approximately 8% in the US and Germany (Source: RedSeer Research, RedSeer Analysis).

Logistics spends in India has been growing faster than large global economies and continue to outgrow them.

The Indian logistics market has been highly fragmented and has experienced rapid growth in the organized market in recent years. Indian logistics market has grown from USD 342 billion to USD 382 billion between 2018 – 2020, at a CAGR of approximately 6%. This is more than the growth the Chinese and American markets experienced during the same period at a CAGR of approximately 5% and approximately (1)%, respectively.

The Indian logistics market is projected to grow at a higher CAGR of approximately 7% between 2020 and 2025. During the same period, the Chinese logistics market is expected to expand at a CAGR of approximately 6%, while the US market is expected to expand at a CAGR of approximately 3% (Source: RedSeer Research, RedSeer Analysis).

Direct logistics is estimated at approximately US$180 billion in FY 2021 and is projected to grow at a CAGR of approximately 15% until FY 2026.

Increasing complexities in supply chain solutions are driving the trend of outsourcing logistics services to expert third parties. The Indian logistics market presents a large addressable opportunity, with direct spends on logistics of US$216 billion in Fiscal 2020 and US$180 billion in Fiscal 2021 and is expected to grow to approximately US$365 billion by Fiscal 2026 at a CAGR of 15% from Fiscal 2021 to Fiscal 2026. Out of this market opportunity, the size of the outsourced supply chain solutions market (excluding e-commerce) in Fiscal 2021 was US$5.9-6.1 billion, which is expected to grow at a CAGR of 25-27% to approximately US$18-20 billion by Fiscal 2026 (Source: RedSeer Research, RedSeer Analysis).

The direct logistics market primarily comprises transportation and warehousing, of which transportation accounted for 70%, or US$151 billion in Fiscal 2020 and 64%, or US$180 billion in Fiscal 2021.

Organized players accounted for only approximately 3.5% of the logistics market segments (which includes road transportation and warehousing and supply chain services only) in Fiscal 2020. Organized players are expected to grow at a CAGR of approximately 35% between Fiscal 2020 and Fiscal 2026, taking their share to 12.5%-15% by Fiscal 2026 (Source: RedSeer Research, RedSeer Analysis).

This shift is expected to be driven by the ability of organized players to offer integrated services, network and scale-driven efficiencies and larger investments in technology and engineering, resulting in a higher share of wallet with customers.

Across key logistics service offerings, there is an increasing need for supply chain solutions. Industry players are looking for customized, integrated logistics service offerings from a single external supply chain partner.

TVS SCS is among India’s largest and fastest-growing integrated supply chain solutions providers with global capabilities and cross-deployment networks across the value chain. For the last 15 years, TVS SCS has managed large and complex supply chains across multiple industries in India and select global markets through customized tech-enabled solutions.