Even before the COVID 19 pandemic provided a massive push to e-retail and online delivery services, the logistics sector in India was on a booming path. According to a market research released in 2020, the logistics market in India was projected to grow at a CAGR of 10.5% between 2019 and 2025. Covid 19 has further accelerated this growth. With doorstep delivery now an expectation not a luxury anymore, dependence on online services has grown exponentially almost overnight. As online buyers surge even in smaller towns, the pandemic has clearly shown that it takes 21 days to form a new habit.
With online sales still comprising just 1.6% of the total retail sales in India compared to 14% globally, we are looking at a massive opportunity for the logistics sector in the near future. With its 14 million retail stores, 1.5 million restaurants and 1 million pharmacies, India also presents an infinite demand for last mile delivery. With even local businesses turning to online delivery commitments, the level of hyper-local logistics delivery will get deeper, demand for transparency and tracking will increase, so will the demand for efficient delivery services from B2C as well as B2B segments.
We will increasingly need business models that are not only efficient but also adept at scaling up without compromising on customer experience.
The India Model: Need For Multi Vertical Delivery Models
For the logistics sector in India, this is an exciting as well as challenging phase. The sector needs to adapt itself to meet the changing needs of the time by revamping its service models and adopting a full cycle approach to the three essential components of a delivery experience: ordering, pick-up and delivery.
Interestingly, the Indian on-demand industry has so far imitated the US model of vertical-focused delivery startups that are focused mainly on food, grocery, and medicines. However, there lies a fundamental difference in the Indian and US markets. The average order value in India is significantly smaller than that in the US, making single vertical operations unconducive to economics. In Indian settings, innovative horizontal or multi-vertical delivery platforms would yield better unit economics by catering to diverse sectors.
Clearly as digitization takes centrestage and customer expectations evolve, the post COVID boom demands greater innovation and adaptation from logistics service providers including experimenting with new delivery models and leveraging tech-enabled systems with data analysis as their bedrock. Localised data, demand predictability, area predictability and technology driven tasks to drive efficiency is the way to go.
Optimising resources across operations
Under-developed infrastructure, fragmented warehousing, inadequate inter-modal transportation, limited use of new age technology and resultant high costs are among the major challenges experienced by the supply chain and logistics sector in India.
A recent report by CII & Arthur D Little India suggested that India’s supply chain industry needs to halve its logistics costs from the current 14% of GDP to 7% to make the sector globally competitive . This requires optimisation across operational levels, creation of resilient logistics services and adoption of digitization across the sector.
Lower delivery density is a major bottleneck that raises costs and prevents optimization. Increasingly, as commitments for time-bound one day and two day deliveries increase, logistics providers are experiencing the growing challenge of less than truckload shipping and low delivery density. A multi vertical delivery model is one step towards addressing the low delivery density problem.
Another important intervention needed to overcome these optimisation challenges is effective use of digital technology and predictive analysis to achieve greater supply chain visibility and step by step tracking. Use of AI based tools and data analysis is critical in establishing intelligent supply chains that can optimize delivery routes as well as fleets and make tracking more efficient and real time.
Real time tracking enables better services to consumers by allowing them the ability to change delivery time or place at different stages of package delivery
Real time tracking enables better services to consumers by allowing them the ability to change delivery time or place at different stages of package delivery. Not only does this improve customer satisfaction, it also saves the time and costs of delivery services providers. Having a real time view of different package locations, delivery providers can predict to a high degree of accuracy the density of supplies at different locations and enable its fleet to adjust delivery routes faster to respond to the situation. This high level of transparency and data monitoring enables optimization of resources to a high degree, thereby savings time and costs.
Improving last mile delivery
Last mile delivery or the final stage of delivery to the consumer mostly happens from one point to another within a city. It is estimated that last mile delivery accounts for a major part of delivery costs for the logistics sector and stands at around 30-40 per cent of the total logistics cost. Evidently, optimising last mile delivery costs can reap rich dividends for the sector.
In fact, efficient intracity logistics are critical not just to satisfy B2C customers but also for optimizing times and costs for enterprises. The manufacturing sector also depends on efficient last mile delivery services to improve its supply chain management.
Digitization and transparency of the entire delivery process is key to achieve the last link optimization by ensuring effective utilization of the delivery fleet. At Pickkup, we have devised innovative technology based solutions to optimise our resources and last mile delivery costs while ensuring high degree of customer satisfaction. Our sector-agnostic multi-vertical model backed by an efficient tech-enabled system achieves not only optimization of the delivery fleet but also yields better unit costs.
Adopting the Industry 4.0 approach is now a critical need for the logistics sector that plays a pivotal role in improving the efficiency of other major sectors in the economy including manufacturing and services. Digital fitness and agility will increasingly become prerequisites for survival of logistics operators, particularly the last mile delivery providers.