E-commerce brought in logistics boom; now, COVID-19 pushing delivery business further ahead
What a difference a decade makes! In 2010, India’s Internet penetration was less than a fifth of what it is today, and online shopping was a phenomenon that only a handful of consumers had experienced. Arguably, the last 10 years have seen more disruptions in the Indian logistics sector, than were evident in the last 100 years. Specialization is the mantra that pervades much of what has changed, and technology has been the biggest enabler of this change.
In particular, there are four key specialization trends that have emerged:
These include B2C delivery focused companies who touch our lives every time we order something online, or the B2B companies that have innovated their business and operating models to serve the agile supply chains of e-commerce companies and their logistics providers. From mobile phones to furniture and groceries, most of what is purchased online today is stored, transported and handled by companies that did not exist a decade ago. In this time of pandemic and lockdowns, a clutch of technology-enabled players are also helping kirana stores place orders online and ensuring timely deliveries to them. As more rural consumers get online and change their purchasing behavior in a post-COVID world, it is these specialists who will be well poised, with their extensive pin code coverage, to serve their needs.
Consumer service specialists
Most of us reading this article may have used apps to order food or supplies online, reserve restaurant tables or get deliveries done from one part of our city to another. Especially in the current times, such specialists have become essential in ensuring the delivery of food from restaurants (which are otherwise closed), medicines and other essential items.
With the lockdown easing in many parts of the country, yet consumers still wary of venturing out, hyperlocal delivery players have played an important role in enabling rapid deliveries between consumers, whether these are documents, household goods or forgotten items that were stuck in lockdown limbo.
There are several industries – such as freight forwarding and trucking – where there is a massive supply fragmentation, with thousands of providers struggling to ensure asset utilization or retain margins in the wake of hyper-competition. A new breed of aggregators, both on intra-city and long-haul routes, are playing a pivotal role in consolidating both demand and supply to ensure that truckers increase their fill rates and freight forwarders get better rates from ocean liners and air carriers, on a larger committed volume base.
In more mature economies, such aggregators have also begun to cut out the service providers themselves, and this is a risk that exists in India as well. However, in India, in the near to mid-term though, such aggregators have been a boon to customers who often struggle to find logistics service providers on less popular trade lanes or trucking routes.
Although technology is the enabling backbone of all specialization innovations, there are a clutch of technology specialists who are enabling logistics service providers to improve the quality of customer service or enhance margins. There are several companies in India today, who are helping logistics companies:
Optimize their transport network and truck routing.
Deploy warehouse automation solutions that improve the speed and accuracy of picking, pallet movement and sorting.
Manage their field workforce better.
Track cargo movement and share relevant data such as the temperature or condition of goods, across transportation modes, in real time.
Discover better input rates for their services
In the next decade, customers are increasingly expected to demand:
Industry specialization: That is, ensuring that logistics service providers understand unique industry supply chains to provide customized services, rather than being generic transporters, warehousing or service providers. Outcome-based pricing is also likely to replace cost-plus or input-based pricing in the times to come.
Solution approach: For decades, customers have sought to minimize the number of logistics vendors that they interact with. This has led to the rapid growth of the 3PL industry, but with new technology platforms, it will likely be the end-to-end service providers who leapfrog faster, instead of point service providers.
Technology enablement: Real time track and trace in the trucking industry has been a hygiene factor for many years, but customers today are demanding multi-channel customer service (e.g. through face to face interactions, phone, chat or even SMS), advanced analytics and exception reporting, deep logistics service provider integration into their ERP systems and constantly lower costs – something that can happen only when technology replaces legacy manual processes.
The days are not far when drone deliveries and autonomous vehicles will further transform logistics globally and in India, but until then, players in the industry need to specialize to survive.
June 19, 2020