E-Commerce and Logistics Revolution

Economic Affairs Industrial Policy and Industrial Growth

What are the emerging developments?

The global logistics sector is undergoing a quiet revolution.
The key benefits are reduced costs, quick arrivals and complete tracking of goods.
The new technologies like the Internet of Things (IoT) and people’s changing preferences in buying goods online are driving this.

Why is the logistics sector significant?

Logistics cost includes all expenses in taking a product from factory to consumer.
These include direct costs like transport cost or indirect costs like charges of freight forwarders, etc.
Logistics cost is significant, and add on an average of 30 to 40% to the cost of the goods.
Thus, while world trade is about $17 trillion, the global logistics sector has a turnover of $5 trillion.
The logistics revolution will transform India’s ocean shipping and trucking sectors.

What are the limitations at present?

The logistics sector currently is less automated.
Firms move light packets through the courier firms that do end-to-end job.
It takes within 1 to 3 days generally, but the costs are high.
Firms thus choose to ship large or less urgent consignments by sea.
It is cheap compared to the courier, but delivery takes more time.
This is because of complex shipping, and customs procedures.
It is also because over 70% of the logistics sector is in small, unorganised hands.
However, this model is set to change.
Many large firms are now entering the cargo business to offer worldwide door-to-door delivery.

How is e-commerce a driving factor?

The major push for logistics transformation comes from the online e-commerce firms like Alibaba and Amazon.
So far these firms have been focussing on flying light packets.
But people now prefer buying even bulky goods like foodgrains or steel online.
The e-commerce firms have to use the ocean route to keep cost under control.
But current long delivery times of sea transport do not help the fast-paced e-commerce delivery model.
So, these firms plan to develop end-to-end supply chain for sea-based shipments also.

How does technology help?

A range of technologies is making ship or truck journey more secure and efficient.
This applies to a combination of the IOT, Block Chain, and Artificial Intelligence (AI).
IOT - IOT sensors provide a unique internet address to each device they are attached to.
They feed the location information into the global database.
Data collated from the devices generate real-time weather and traffic advisory using AI tools.
Sensors - Internet-connected sensors are placed on the individual packets/consignments.
They make tracking possible across the supply chain.
It also ensures against pilferage and contamination.
Satellite trackers do this even when there is no mobile coverage.
Blockchain technology - Data from the sensors can be uploaded on the blockchains.
This allows everyone in the supply chain to view the condition of a packet during the journey.
Apps - Return of empty ships and trucks after delivery of goods increases the cost by about 30%.
Simple mobile apps now facilitate customers and owners to strike a quick deal to ensure near-total use of space.

What lies ahead for India?

Technology - The variation in time for an export container moving from a factory to port ranges between 40-70 hours.
The uncertain delivery time increases inventory and freight costs.
India’s logistics costs are 40% higher than in most developed countries.
Incentivising the use of new tools will provide more certainty in cost and time of delivery.
Skilling - The logistics revolution will lead to business consolidation leading to tough times for small players.
About 7.5 million jobs are estimated to disappear in the US alone in the next 10 years.
The situation in India will be no different, with e-commerce and logistics related changes.
Logistics service providers/ small trucking and shipping firms must look to upgrade their skill.
Changes in the logistics sector will deeply integrate India with global supply chains.