With an eye on vaccines, logistics sector preps to go full throttle in 2021
The pandemic and its fallouts severely crippled India’s logistics sector in 2020. But with the massive task of distributing vaccines across the country, the sector is waiting for its most important year.
Amid a lock down in April, angry locals and villagers often confronted truckers carrying essential commodities whenever they stopped. Distrust and fear wer e high, and many considered truckers to be ‘corona carriers’. Criss-crossing the country, many drivers often struggled to find food or water.
For India, the year 2020 could largely be characterised as the year of widespread lockdowns. With the pandemic ravaging, every Indian state remained under some form of lockdown mostly through the year. As the nationwide lockdowns brought the nation’s economic activity to a screeching halt, its logistics sector, the lifeline of the country, was also dealt a body blow.
Now, as logistics and supply chain firms prep to bid goodbye to a crisis-ridden year, the stakeholders whom ET Digital reached out to seem optimistic on the road ahead. Their role will be vital as the nation prepares to roll-out vaccination of its large populace.
“For the global economy and business alike — 2020 was the year of resilience and 2021, I foresee, one of renewal. I am already seeing a positive uptick in the economic activity post the lockdown months. I expect it to reach near pre-Covid levels by the first quarter of 2021. The coming year promises to be an interesting one with business confidence improving with each passing month,” says RS Subramanian, Senior VP and MD, DHL Express India.
Industry representatives also highlight the logistics sector's critical role in keeping the nation up and running all this while. According to Subramanian, lockdown or not, the logistics sector has remained in operation. “From delivery of essentials to aiding the trade ecosystem - the logistics supply chain has been alive and buzzing. More so during the pandemic, there has been a greater appreciation of the critical role logistics have played to move essentials and medical shipments on priority. As the vaccines get rolled out, logistics will again be at the core of the immunisation drive against the virus,” he emphasises.
Echoing similar views, spokesperson for leading container logistics company Maersk asserts that the logistics and supply chains sector has proven to be the economy's backbone, especially during the ongoing pandemic. “The sector is only expected to strengthen on a further basis the resilience and agility it offers. We have seen that a lot has changed in 2020 — the retail behaviours have changed, sourcing patterns have changed, manufacturing strategies have changed, and all this has ultimately changed the way the logistics sector operates. While we have seen some of these changes take shape in 2020, we will see them getting firmer in 2021,” adds the Maersk spokesperson. The Maersk’s view is shared by many industry observers who believe this new digitisation fueled trend will gain momentum in 2021.
India's ranking in the Logistics Performance Index in 2018.
Is business optimism back?
Various logistics players reveal to ET Digital that the business optimism of pre-Covid levels is now slowly on its way back. Maersk spokesperson affirms that the trade has improved from Q2/2020 (April-June) to Q3/2020 (July-September) and the firm is seeing exports bouncing back stronger than last year.
“Imports have picked up, giving an overall push to trade in and out of India. While the trends inspire optimism, business is not back to the same levels as pre-Covid. We continue to steer through foggy conditions and expect the business to be somewhat back to normalcy in the first half of 2021. A lot of it depends on several external factors, first of which is the vaccine against Covid, its efficacy and its global distribution,” says the Copenhagen-based shipping firm.
According to DHL’s Subramanian, over 90% of our customers are now operational and are operating at 90% of their capacity. “Export trade continues to be strong as the global markets have opened up and are moving to the year-end peak season. The peak festival season in India also provided a further boost to trade due to surge in shipment volumes. This uptick in activity marks a significant improvement since the initial months of lockdown. It also makes us hopeful about businesses returning to pre-Covid levels as early as the first quarter of 2021,” he says.
On the same note, Pushkar Singh, Founder and CEO of LetsTransport emphasises that while no instruction manual has even been written to handle such situations, the Indian ecosystem showed more agility/resilience in both during and post the pandemic. “In fact, I am more optimistic about the business now as compared to earlier days. People and the government have now understood the importance of tech-enabled logistics. They have understood the role it is playing in supporting the economy of the country, almost everything depends upon logistics,” Singh says.
Logistics firms, at the cusp of the New Year, are bullish on the opportunities to be tapped soon. In many cases, India is best placed to tap these never-before opportunities, the industry believes.
DHL’s Subramanian indicates that the firm aims to tap several new opportunities. He says the firm’s expertise, capacities and capabilities to manage time-sensitive temperature-controlled logistics will enable it to be at the forefront of COVID-19 vaccine distribution efforts worldwide.
“During the pandemic, some opportunities have come up and we see business enterprises, SMEs even re-looking their supply chain. I see a window of opportunity for Indian businesses to step up participation in the global trade. For example, India is establishing its clear strength as the pharmacy of the world. The country has cornered a large global market as a contract manufacturer for vaccines. Similarly, we can count on India to become a preferred supply hub for businesses across a cross-section of industries,” he adds.
Currently, the logistics cost in India stands at 14% of GDP, compared to the global average of approximately 8%. With a logistics industry of $215 billion, growing at a CAGR of 10.5%, India’s supply chain and logistics sector is one of the largest globally. However, the country’s supply chain is marred by an unbalanced logistics modal mix, high indirect costs, poor infrastructure, fragmented networks, and lack of technology adoption, highlights a recent CII-Arthur D. Little report. The report added that India needs to bridge the competitiveness gap of $180 billion vis-à-vis the supply chains of advanced nations, and for that, it needs to halve its logistics cost from 14% of GDP to 7%.
Opening up on India’s efforts in this direction, Maersk maintains the firm sees efforts from the government to improve — the state of logistics and supply chains through investments in infrastructure development and technology adoption. “If these two pick up pace in 2021, it will be a big boon for the logistics sector,” says Maersk representative, adding bilateral agreements with various geographies to support more trade, policy reforms to support higher investments in the country, development of hinterland infrastructure and port connectivity and faster, paperless processes to improve efficiency are areas to bring about a change in the way logistics works in the country.