A recent Deloitte report pegged the Indian logistics industry as one of the fastest growing express industry globally. Growing at a CAGR of 15% over the past five years, it is estimated to be worth INR 22,000 cr in FY17.
With the e-commerce boom and the rise of a number of high profile companies, it will be surprising to note that this sector makes up only 5% of the entire market at present. However, it is this tiny chunk of the market that is drawing the other segments into a sort of revolution.
The largest chunk of the logistics market is the burgeoning automotive and automotive components sector with a market size of 2,100 crores. With over 4,000 parts in a single car on average and each of these parts assembled by multiple vendors (who have suppliers of their own!), these supply chains run round the clock 365 days a year.
However, even though these supply chains are hugely complex, it is only in recent times that OEMs and auto-component manufacturers have turned their attention to this pivotal function as a differentiator rather than a cost function.
The auto and auto-component industry can be characterized by a few key trends –
- Highly manpower intensive: a common trend for managing logistics in this sector is to add people (and confusion) as operations scale.
2. Legacy operational models: apart from some leaders, most companies in the sector carry out their logistics operations ‘the way it has always been done’ — on paper and phone calls. Emails and WhatsApp have been added to the list but have only added to the redundancy.
3. Firefighting, reactive operations: Managers are almost always fighting problems, pacifying angry customers or chasing their vendors. There is the only thing in common — all these actions are after the error has occurred and been escalated.
4. Plagued by leakages: Inefficiencies such as demurrage, detention, customer penalties, loss of business due to poor SLAs have been seen almost like a cost of doing business rather than a serious problem.
With the e-commerce revolution over the last decade, a spotlight was thrown on the logistics sector. In a fiercely competitive market with huge cost pressures, the express logistics industry underwent a sort of transformation.
Only companies that could provide the level of visibility, adherence to the strictest of SLAs as well as win the trust of the large e-commerce companies would get a share of this lucrative new market.
As logistics majors vied for this a chunk of business, the changes and upgradations that they made affected all their other businesses as well as the market as a whole.
Another fundamental change brought about by the e-commerce market was the change in customer expectations. With e-commerce, customers now started taking the next day, fully tracked deliveries for granted. If I can get it for my mobile being delivered from Bangalore to Delhi, why can’t I get it for my auto-components? seemed to be the question on logistics manager’s minds.
A number of other trends such as the use of predictive analytics for operations management, route and network optimization, use of analytics for data-driven decision making are all that have been proved to be highly effective in reducing logistics costs.
With intense price competition in the automotive industry, automotive leaders are looking to their peers in the e-commerce industries who successfully leveraged their supply chains to differentiate themselves from their competitors.
It is impossible for such a huge industry to change overnight, but there is no shortage of encouraging signs. While the inventory management process has always been given a high amount of focus, the logistics and fulfillment legs of the supply chain are also coming under scrutiny. Logistics vendors are being forced to pull up their socks whether it comes to tracking or SLA adherence and industry leaders are fully utilizing the power of data analytics to closely monitor and improve their supply chains.
We at Shipsy, are continuously devoted towards providing technological solutions which can prevent and lower such cost.
Harsh Gaur
Digital marketing expert, who loves the art of transforming the world digitally.
- December 21, 2018
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