Logistics Startups in India: The Current Scenario and Challenges
While the disruption in the logistics sector has been long overdue, the segment continues to hold a strong inertia to digitisation.
While logistics has been an invisible lifeline of businesses for decades, it has been mostly looked upon as an essential expense instead of a significant business investment and value driver that can impact revenue generation. Also, while major sectors like Healthcare, Finance, Retail, Infrastructure, Entertainment, Marketing and Communications have been rapidly adapting digital technology innovations, logistics, however, has been one of the least impacted sectors. Hence, business faces much inefficiency while making freight decisions. This is slowly changing as the next generation entrepreneurs from the freight forwarding community are taking up the challenge of disrupting the sector through innovative digital solutions.
Currently, some of the key limitations which online logistics start-ups are trying to address are as follows:
1. Lack of Standardised, All-Inclusive rates
Businesses procure quotes from multiple freight forwarders and receive segmented rates, with multiple cost items, variable charges and per unit costs rather than a consolidated price. This results in a tedious process of calculation and comparisons that take up several man hours in computing a total freight cost which often differs from final invoice value.
2. Missing Delivery Schedules
When making a freight booking, SME’s need to compare international freight rates and delivery times between several air or sea freight forwarders. However, they do not have a dashboard to access vital information like multiple airline/shipping line choices, shipping schedules and exact delivery dates that they would need to pick the most suitable option. Getting access to adequate information in order to choose the most appropriate freight option is vital to ensure that businesses do not incur additional logistics costs and consequential losses including loss of sales and penalties for delayed deliveries.
3. No centralized shipment management and tracking interface
Most exporters/ importersneed to manage several shipments via different transport modes using multiple freight forwarders. As a result, even when dealing with the best of freight forwarders, the customer does not have access to a centralized order management platform with real-time shipping status updates. Hence, keeping track of all their shipments and receiving timely and regular updates regarding the progress of the shipment is a major challenge.
The above challenges impact the business resources the most. Having employees spend hours in procuring freight quotes, making manual cost computations, negotiating and co-ordinating shipments with multiple freight forwarders, can impact productivity in the core business area. This results in draining valuable man-hours, talent and monetary resources while negatively impacting corporate profits.
Digital logistics start-ups are helping to streamline the process by offering all-inclusive rates with delivery schedules and centralized online shipment management dashboards, that will reduce strain on resources and improve productivity.
However, there are still many challenges that need to be addressed before the industry adapts the digital innovations:
Transition from Offline to Online:
For decades,manging freight quotes and shipments has been a cumbersome process. With a vast amount of data being shared in fragmented form by multiple vendors, the clientswere left to work on tedious calculations to select the desired freight forwarder, often draining resources and compromising accuracy. Despite these issues, moving to a more efficient, accurate and transparent online process has been a barrier for major stakeholders as they still find comfort in the known and accepted process of email and telephonic communication.
Pre-existing Business Relationships:
As in most B2B industries, the logistics sector also has been functioning on strong interpersonal relationships. Loyal and long standing relationships between logistics providers and clients are often difficult to break, despite having access to more efficient online freight service offerings. Additionally, lengthy credit periods are difficult to turn down for most businesses, even when receiving discounted prices. Having said that, several online logistic start-ups are now forging newer and mutually beneficial relationships with clients, by illustrating how access to all-inclusive freight pricing and schedules and transparent shipping updates allows them to save time and make more efficient decisions while reducing logistics costs for their businesses.
Creating Value for Logistic Service Providers (LSP’s):
Since the benefits of digitisation and organised logistics are yet to make its way into mainstream logistics businesses, getting LSP’s on-board is equally challenging as getting importers/exporters on board a digital platform. With a largely experienced task force that has, for decades, been successfully growing and shaping the sector through trusted processes, the transition to a digital framework is met with scepticism. Through a collaborative approach and creating a win-win business opportunity for LSP’s and a committed service oriented approach for importer/exporters, online logistics start-ups are trying to address the issue effectively.
While the disruption in the logistics sector has been long overdue, the segment continues to hold a strong inertia to digitisation. However, by creating a mutually beneficial ecosystem for both customers and LSP’s, where customers reduce cost and improve productivity while LSP’s increase revenue at lower acquisition costs: logistics start-ups are slowly but surely transforming the industry.
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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