STATE OF LOGISTICS TECH: 2023

In an environment with higher demands from consumers and a constant push to innovate, the logistics industry is undergoing major changes. Recently released Pando-Kearney report throws spotlight on top 5 megatrends that are slated to drive the Indian logistics industry in the years to come. Excerpts…

LOGISTICS in India is one of the world’s largest industries, valued at about $215 billion and contributing to about 14% of the nation’s economy with an annual growth rate of 10.5%. The industry is comprised of transportation (60%), warehousing (25%), freight forwarding (10%), and value-added logistics (5%). However, the COVID-19 pandemic triggered significant disruptions in the corporate landscape, and the logistics industry has not remained outside of the purview of these disruptions.

With the combined effect of consumers’ ever-higher demands, strong growth in the direct-to-consumer (D2C) start-up ecosystem (accelerated by the pandemic), and the constant push to innovate and adopt new technologies, the logistics industry is undergoing major changes. For example, India’s road transportation industry was unorganized before, but now, it is shifting toward contactless operations and digitalization.

With quick commerce and deliver-ondemand expected to be a game-changer for the industry, it’s time for shippers to embrace technology to build the capabilities they need to stay in the game in this fast-paced world.

On The Cusp Of A Transformation

Five mega trends are unfolding to create a new logistics industry in India:

Trend 1: The Growing Shift from Multichannel

to Omnichannel

Companies with omnichannel strategies retain around 89% of their customers compared with the 33% that companies retain when using single or multichannel fulfillment. Customer emphasis on flexibility and convenience has led to the need for multiple channels working in unison with a seamless exchange of information. Today, with the support of innovative new technologies, omnichannel services have become the go-to option for many brands. Implications for logistics: Delivery is now originating from multiple fragmented pick-up points. Logistics suppliers must not only offer rapid and personalized services while being closer to the customer but also have sufficient capacity to meet scattered demand and a growing culture of immediacy. The advent of dark stores for super-fast fulfillment mandates that companies or logistics suppliers build a strong backend supporting unified order fulfillment with an agile supply chain.

Trend 2: A Greater Need for Information Transparency and Visibility

Seventy-three% of consumers say they will pay more if they are assured transparency, while 39% say they would switch to a new brand if they were promised greater clarity, transparency, and visibility. Now that consumers have a plethora of options, businesses must gain and maintain customer trust—the one- way gate for information transparency and visibility to customers. Customer transparency means honesty and integrity in all customer communications, keeping them informed by asking for feedback and notifying them of improvements to products and services and treating their personal data as sacred.

Implications for logistics: To maintain transparency and visibility for consumers, businesses must establish a transparent and visible supply chain, covering all areas of concern in both inbound and outbound logistics. In post-pandemic times, this has gained importance as buying patterns are changing in unpredictable ways, carrier capacity availability is dynamic, and the need to expedite shipments is regular and at an all-time high. Companies are investing in technology such as transportation management systems and supply chain control towers to enhance visibility across their value chain. Efficient order orchestration for expedited fulfilment through real-time visibility is gaining traction to be a key supply chain objective for logistics majors. Other benefits include better on-time case fill performance, better customer experience, reduced operational costs and efficiencies, carrier performance visibility, and visibility to vendor partners on their bills processing and payments.

Trend 3: Volatile Demand with recent Uncertainties

Demand has always been volatile, but the pandemic made it change even more rapidly and unpredictably, mostly because of customers’ changing preferences. Consumers have come to expect companies to not only provide a wider variety of products but also make them readily available for purchase and provide them at their doorstep the very next day. Implications for logistics. For years, logistics and business planning have been working in silos, but now in order to manage the volatile environment, they need to collaborate not only with each other but also with the customers. Analytics-led forecasting, optimization in warehouse management, and having a seamless platform laced with AI, machine learning, and other technologies have become important for logistics partners to cater to the modern consumer’s needs.

Trend 4: Rising Cost Pressure for Manufacturers

Under the commodity inflationary scenario, input costs are at an all-time high, and this is putting tremendous cost pressure on manufacturers. Raising the prices of their goods and services to protect both gross and profit margins means taking a hit on their consumer base, which will quickly move to a competitor and thus affect the company’s P&L even more. Thus, they need to curtail their input costs wherever possible to keep the prices of the end products similar to current prices.

Implications for logistics: This rising cost pressure for manufacturers is leading to a need for more efficiency from logistics partners Logistics has to ensure that the total cost to serve is at an optimum for companies. The expectation of cost control extends beyond supply chain expenses to waste and pilferable expenses along with an opportunity loss because of out-of-stock situations. With the growing expectation for immediacy and transparency, maintaining an optimal cost is a major challenge for logistics. Collaborative execution by logistics players is paving the way for optimized fulfillment.

Trend 5: A growing focus on sustainability, especially decarbonization

Following India’s announcement of a net zero target, businesses have a pivotal role to play in the climate fight, helped by the growing customer and investor focus on sustainability as well as the increasing regulatory and disclosure requirements. Consumer research shows that consumers are willing to pay a premium as high as 60% for environmentally friendly products. This sentiment is most prevalent among Gen-Z and higher-income shoppers, who are quickly becoming the dominant consumer cohorts globally.

Implications for logistics: Typical fastmoving consumer goods (FMCG) companies have a 4 to 6% contribution of upstream and downstream transportation and distribution in their scope 3 emissions. Thus, it is no surprise that transportation optimization has become one of the keys to reduce the carbon footprint. More organizations are pledging to reduce their scope 3 emissions, generated upstream and downstream of the value chain and those embodied in transport and distribution. Slashing planet-warming gases produced by transport and logistics will be instrumental in helping nations and corporations hit their climate goals.

More companies are looking at sustainable options to reduce the carbon footprint in logistics. Some measures to ensure that operations are sustainable and eco-friendly are collaborating with an EV fleet (using e-2W and e-3W for last-mile delivery), hyperlocal delivery from stores to eliminate large shipping fees, and distribution costs. EV logistics tech delivery start-ups such as Zyngo EV, and Zypp Electric handle end-toend last-mile deliveries—from stores to customers’ homes—with a variety of differentiated tech-enabled solutions, including the use of e-vehicles, service timing fixes, and IoT-enabled battery swapping infrastructure.

To remain successful and to thrive in the market, logistic players must address these new trends in the industry and provide solutions that are agile, flexible, simple, and competitively priced. It is important for Indian logistics players to invest in upgrading technologies to help their systems become smarter and more efficient, even if it means reinventing their processes. Companies can work on developing services that create demand rather than restricting themselves to meeting current demand. To do this, logistics companies will need to maintain strong relationships with customers and the market so that they can be at the forefront of shaping the future. With more disruption in technology on the horizon, industries should be ready, to anticipate how their capabilities need to evolve and how they can partner with new-age logistics companies.

(To download the full report please visit - https://pando.ai/resources/industryreports/state-of-logistics-tech-2023)