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Challenges Faced by Logistics Industry in India
Transport Related Challenges
In India road has become predominant mode of transportation of freight cargo.
Estimate of the modal movement of cargo highlights that in India nearly 60.2% of the
cargo is moved by road, 32.1% by rail, and rest by the coastal shipping, airways and inland
waterways. Pipelines constitute a very minor proportion.
While Road movement is preferred to rail, road movement has its own set of challenges.
They are:
1. Road network coverage- Freight movement in India is dependent on national highways.
While NH constitutes only about 2% of the road network of India, they carry 40% of total
traffic. As a result most of these highways are severely congested.
2. Poor road quality- The road quality in India, on the NHs as well as the roads is
improving but is still poor in many locations. Estimates suggest that motor able roads are
still less than 10% of the total road network.
3. Expressway network will take time to develop- In many developed countries
expressway s have been developed to facilitate high speed freight movement through
linking of important cities, ports and industrial centers. In India the expressway network is
still largely at a planning stage.
4. High level of fragmentation of the trucking industry- The trucking industry in India is
largely fragmented and in the hand of small truck operators. Estimates suggest that nearly
70% of the truck owners in India own between 1-5 trucks. Due to this there is fierce
competition amongst operators leading to truck owners resorting to overloading to recover
investments.
5. Multiple checkpoints- Trucks in India have to pass through multiple check points in
their journey. Trucks have to stop at state borders, for payment of toll taxes, for RTO
inspections etc.
Issues of Port Sector
1. High turnaround times- Data from Indian ports association shows that ports in India
suffer from high turnaround times for ships. JNPT, the premiere port in India, has more
than two times the turnaround time of Colombo and Singapore ports because of congestion
on berths and slow evacuation of cargos unloaded at berths.
2. Inadequate depth at ports- The depth at many ports in India is not enough and dredging
tenders take a long time in getting awarded. As a result with the existing dates many ports
are unable to attract very large vessels.
3. Coastal shipping has not taken off- Coastal shipping in India is hampered by inadequate
port and land side infrastructure which hampers large scale use of it for freight
movements.
Storage Infrastructures Related Challenges
In addition to the poor transportation infrastructure the storage infrastructure in India
also needs significant improvement. Main reasons for this are:
1. State of ICD/CFS is poor- The ICD(Indian container depot) /CFS(Container freight
stations) infrastructure available for EXIM trade is inadequate. The land requirement for
setting up ICD/CFS at an appropriate place is difficult to come by as several hurdles have
to be cleared in the consolidation of land. As a result many logistics companies with an
interest in setting up ICD/CFS eventually fail to do so. While it is difficult to set up a
facility, at the same time the existing facilities are plagued with several issues:
- Many of the older facilities today are located within city boundaries restricting day
movement of trucks.
- The approach roads to the facilities are poor making evacuation of cargo difficult.
- Most facilities have issues of inadequate parking, lack of available land for expansion etc.
2. State of warehousing is poor- Various estimates put warehousing costs to be around
10% of the total logistics costs. Despite this the state of warehousing is largely dismal. On
the warehousing front 80-85% of warehouses are traditional with sizes of less than
10,000sqft. Most of these warehouses are not leak proof, equipped with security systems,
racking facilities etc. Majority of the operators of these warehouses are also small to mid-
sized entrepreneurs with limited investment capacity, The only large warehousing owners
are government agencies including central warehousing corporation and state warehousing
corporations, but their focus is mainly on food grain storage. There is also shortage of
warehouses. This is because land availability for warehousing at an appropriate place and
at an appropriate price is a concern.
3. State of cold storages is poor- Despite the significant requirement of cold storages from
the retail sector, pharmaceutical and chemical sector and the farm sector, where it is
estimated that up to 40% of the fruits and vegetables grown in India gets wasted, receptor
needs to grow much faster to meet the needs.
4. Multi-modal logistic parks yet to take off- With emerging requirements of integrated
logistics, provision of transportation hub, value addition etc. large logistics park were
sought to be developed. However as with other areas the number of such facilities
continues to remain much less than the requirement. Consolidation of large land parcels is
a significant issue hampering their development. Other issues include the lack of
recognition of the concept of logistic park by government.
Tax Structure Related Challenges
A complicated tax regime places several challenges on the logistics industry. Payment
of multiple state and Centre taxes results in:
1. Considerable loss of time in transit for road freight in order to pay such taxes.
2. Fragmentation of warehousing space especially for low margin products thereby
providing a disincentive to create a large integrated warehousing space. A uniform tax
structure to be introduced through the GST is being highlighted as the panacea for the
existing situation.
Technology and Skills Related Challenges
The logistics industry is also hampered by low rates of technology adoption and poor
skill levels. On the technology front the industry now seems to be paying serious attention
with use of RFID, vehicle tracking technologies, warehouse management system etc.
While acceptance is perhaps is not an issue anymore. Automation in processes is still only
in its infancy. Further progress is dependent on a certain level of standardization which is
made more difficult by the fragmentation in the industry. This drawback needs to be
tackled at the earliest.
In addition to the technology related issues the skill levels of in the logistic industry
also require to be upgraded urgently. As now courses focusing on logistic industry remain
few and far between. Also logistic industry is still not looked at as the industry of choice
for young graduates thereby making hiring of quality professional manpower challenging.
Some of the skills required in this sector are technology skills, driving skills including
safety procedures, industry understanding and multi operator’s skills.
5 MAJOR PROBLEMS THE GLOBAL LOGISTICS INDUSTRY IS FACING
Logistics is a huge industry. There are many challenges facing this industry today. Here are some of
the major issues mentioned below.
Changing customer needs
Now logistics solutions must be tailored to the customers’ needs. There should be full transparency
in orders and all stages from raw material stage to the final sale must be visible. Reverse logistics is
used by many. It is a challenge to keep up with the good quality services as there are so many
factors involved.
On time delivery
It is a challenge to provide on time delivery in the logistics industry. In the case of vessels, it takes
months to discharge. Air cargo takes less time, but they are expensive.
Infrastructure
There is a lack of infrastructure. Many terminals are trying to make room for large vessels. This is
causing congestion problems. If these infrastructure issues are not resolved fast, we will continue to
have congestion problems.
Capacity
In the U.S, there is overcapacity in ocean shipping and tightening capacity in domestic shipping. So,
freight rates are increasing. There is also aging workforce and increased regulations that are
increasing the cost.
Security
Security is a major concern in this industry. Goods are passed from one provider to the other. They
are kept in local warehouses and then delivered by truck. So, security is a big problem
