B.I.D

An Unresolved Cost Reduction Problem in Logistics (Transportation) for Businesses

A logistics company plans, implements, and controls the movement and storage of goods, services or information within a supply chain and between the points of origin and consumption. Various logistic companies handle some or all of these supply chain functions, depending on a client’s logistical needs.

These logistic companies, the businesses to which they are providing the services and other businesses who are handling logistics on their own still face a problem of cost reduction in their supply chain process especially in transportation. Transportation cost is high to the companies when compared to other processes involved in the logistics supply chain. The transportation cost as a percentage of total logistics cost in India is approximately 40%.

India’s transportation costs are very high due to inconsistent quality of roads, intra-city traffic and regulatory delays (the regulatory delays were more or less solved by the introduction of the Goods and Services Tax, more commonly known as GST, but its fruition is yet to be seen). High labor costs will cause automation to take over at least the unskilled jobs such as inventory handling. But this is a different issue.

Logistics is a $4.3 trillion industry globally. The Indian logistics sector is presently estimated to be worth around $185 billion and is poised to grow phenomenally and reach a size of $215 billion by 2020. Logistics cost in India accounts for 13-17% of the Gross Domestic Product (GDP) which is nearly double (6-9%) the logistics cost to GDP ratio in developed countries such as the US, Hong Kong, and France. This is higher because the Indian logistics sector is largely unorganized and inefficient compared to its global counterparts. These inefficiencies in the logistics chain currently cost the economy an estimated US$95 billion.

In July 2018, the World Bank published the Logistics Performance Index which shows that India slipped from 35th position in 2016 to 44th position, which gives us a hint about the future of our logistics & transportation industry. And if any steps are not taken now, then we might slip down the position again next year.

 

Transportation and delivery need to planned properly along with the strategic routing and also analysis needs to be done with the help of which an optimal route can be found. Thus reducing the transportation time and cost. Warehouse and small inventory locations are also decided on various factors which further reduces the overall logistics costs. But these solutions required to be come up with changes in current followed processes and align them to our maximum benefits.

What if a company (which might be founded by you) develops a process which provides other businesses a service of transportation and consulting where you help them reduce their transportation time and cost. What if your company applies an innovative way to change the processes involved in order to align them with the help of digitalization and technology to reduce the time and cost of transportation, thus the inefficiencies and losses in the industry can be minimized. You can be the one changing the current trend in the logistics sector by changing the process, reducing the operational time and cost and helping others to achieve the same.

Become an Innovation Catalyst with Bots ‘N Brains to solve the problems around us and help India become a better country.

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