Indian Logistics Is Embracing Technology As It Braces For A Third Wave

Anjani Mandal Aug 30, 2021

The Logistics and trucking Industry in India is highly fragmented, a one with three-fourth of truck ownership split across a large number of small fleet owners having under five trucks, and the rest with relatively larger transport companies that operate by combining their own fleet along with those sourced from the market on a need basis. Manufacturers and distributors try to minimize their complexity and unpredictability by contracting with large Transporters, and these Transporters, in turn, hire and manage the small fleet owners for fulfilling their contractual requirements.

The stop and restart of economic activity during the last year and a half has had a significant impact on the fortunes of small business owners in the industry, and the wave after wave of adversity that started with the economic slowdown in 2019 has changed the composition of the trucking ecosystem.

The lockdowns during the first and second waves proved to be fatal to a large number of small fleet owners. The EMI moratorium during the first wave helped some to stay alive longer, but the lack of adequate demand volume resulted in large numbers going out of business during the second wave. The grim reality is that the active long-distance trucks have shrunk by over one-third since Jan 2020.

Even with the pandemic being restricted to Kerala & The North-East today, fleet owners & drivers have been hesitant to undertake journeys since return load availability within 1-2 days as was the norm, is not available. Another second-order impact of COVID has been that the government is forced to keep fuel prices up to support the country during the pandemic-induced tax collection disruptions. These combined with the reduced overall population of operating trucks, have disrupted the supply-demand equation to a new normal with the number of trucks required at each shipping point to every destination often being in short supply.

The combination of these three factors – reduction in the overall population, a significant part of the trucks moving away from long-distance trucking, and the increase in fuel costs by 50% - have resulted in trucking costs increasing by 40-50%.

Changed demand pattern due to the pandemic

Buyer preferences while choosing long-distance service partners have changed substantially due to the unpredictability of the overall environment and the overall risk perception associated with relatively smaller service providers. While the bigger transporters face all the fundamental external challenges as the smaller ones, they have better-staying power and the ability to service their loans and obligations better. Manufacturers / Shippers are actively making adjustments to their supplier profile and are bringing in bigger players for better stability and predictability – resulting in an overall consolidation of the industry.

Organizations have defined new protocols & SoPs for responding to infection among staff with defined start-stop of operations resulting in the elimination of indecisiveness & unpredictability which were associated with the first wave at the plants.

At the same time, the logistics sector has gained in terms of resilience through the adoption of technology. Lack of supply chain visibility reduced certainty for deliveries, and key personnel going missing for weeks at a stretch have made organizations turn to technology adoption like never before. Technology-enabled Transporters that switch seamlessly to remote operations have electronic fleet tracking, and responsive customer service is finding favor with more & more organizations.

There is a definitive push from organizations to work with the only tech-enabled partners of the organized sector, and this is, in turn, aiding the consolidation of the logistics industry. With covid induced disruptions lasting as long as they did, some of these new habits are irreversible and have become the new trend along which the logistics industry is evolving.

India and the world itself are bracing for a third wave of the coronavirus, but all three, the Government across most parts of the country, manufacturers & other shippers, as also the players of the logistics industry are better prepared time.

The combination of localized lock-downs by the Administration, the industry’s ability to respond to disruptions through specific actions, the vaccination drive combined with the clear signs of an overall pick-up in demand is gradually moving the overall sentiment to one of cautious optimism.