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Abdul Khadeer Mohammad

Founder & CEO, AI Logistix

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How To Manage The Unorganized Sector Of Logistics?

Logistics as an industry is fragmented into different segments like Warehousing, 3 PL, first mile, middle mile, last mile, Express, PTL, FTL, etc.

The Indian logistics sector is in a booming stage and accounts for 14% of the country’s GDP. With the rapid digitization of every sector in the Indian economy, the logistics sector has been able to grab more opportunities that have fastened the sector’s growth as compared to the previous years. With initiatives like Make in India, the Logistics Service Providers (LSPs) have been able to become an immensely helpful resource for all SMEs and organizations.

While there is a gradual growth in the industry there are also several challenges that need to be addressed and rectified through proper mechanisms and systems in place. Divided and unorganized sectors, Infrastructural bottlenecks and Cost insinuations, etc. are the major challenges that hamper the growth of the sector due to the non-delivery of high-quality services to the end customers. While the challenges are many, the biggest of all is that the sector is highly unorganized, leaving other problems to develop and sustain in the system. Hence, this is an issue that needs to be addressed urgently.

Logistics as an industry is fragmented into different segments like Warehousing, 3 PL, first mile, middle mile, last mile, Express, PTL, FTL, etc. Additionally, there are geographical segments that bifurcate the workings like Metro, Non-Metro & Rural. In every segment, there are many unorganized players which makes the management of service level expectations extremely difficult for companies. This is one of the reasons why every company looks for organized logistics service providers.

Ways to manage the unorganized sector of Logistics

To bring the Indian Logistics landscape in complete synchronization in terms of the system and principles of working, there is a need to bring all the unorganized players under one roof which is a more viable option rather than creating a fresh network. Therefore, here are few things that can be done to manage and develop a better and more organized logistics industry-

· Building a network of already existing players and streamlining the process- There needs to be a system wherein a network across different districts is created for a much more reliable, formidable service level bringing that delight factor with customers and their customers.

· Focus on rural logistics landscape- There needs to be asymmetrical development of logistics in both rural and urban logistics landscapes. In the Rural logistics landscape, the unorganized sector is the only go-to option for the customer. But the rural players lack the insight for technological advancements and are unable to grow or maintain the service level consistency. Hence, there is a strong need to organize this sector making the entire logistics industry roped into one system.

· A standard margin revenue in the industry- In India, over 90% of LSPs are those who own less than 2 trucks and 95% are those who own less than 5 trucks which weakens the quality of services. The large LSPs serve established organizations and have larger resources to cater to the needs of such customers. While on the other hand, small players agree to succumb to a low margin which affects the industry as a whole. The way out of resolving the issue is the standardization of profit margins for the industry as a whole.

· Skill development- Skill development is the biggest issue in an unorganized sector. Hence along with streamlining the process there also needs to be a central statutory body for skill development of both large and small LSPs. This will be a big step in educating the players about the technological advances that can transform their logistics game. Also, this will help in establishing the equal ground for growth for all.

The logistics industry in India is very vastly spread with more small players than the large ones and hence making it an organized sector may be a difficult task but it is a step that will not just streamline but will also increase the profit margins for the players and ease of accessibility for the consumers.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house



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