Logistics Future

Today corporations are looking for a sustainable competitive advantage not for growth alone for but also for survival. The killing competition is compelling corporations to review their business processes to deliver the products and services to the customers, who are more demanding and looking for the value for money they are spending. Today competition has shifted from product to supply chains. Supply chain management is an organizational concept whose primary objective is to proactively manage a two-way movement and coordination of goods, service, and information from raw material suppliers to the end customers. A supply chain is a close link between procure­ment, manufacturing and distribution. This link is weaved into a seamless chain with one thread called logistics. The coordination of material and information movement across a supply chain is possible with integrated logistics. Today logistics management is based on the system concepts and cost approach. The efficiency and effectiveness in material and information movement are possible only with integrated logistics operations. Logistics activities such as transportation, warehousing, material handling, inventory management and order processing have a significant impact on cus­tomer cost and operations. An inefficient logistics operation may force customers to carry more inventories resulting in a burden on their profit margins. The integrated logistics helps take cost out of the supply chain and enhance the customer service level. Logistics is an important sub-system of the supply chain. It facilitates the continuous material movement at a reduced cost to make the right product available at the right place and at the right time at the minimum cost.

At a macro level, growth of a country’s economy depends on the availability of an excellent logistics infrastructure. Speed of goods movement greatly depends on the road and rail networks across the length and breadth of the country and the load bearing capacities of the national and state highways to carry heavy cargos. The air links and port terminal facilities are equally important for boosting export trade.

The Internet and communications technologies have made the entire world a global village. Due to globalization and emergence of the WTO regime, buying and selling activities have become more competitive and have crossed national boundaries. Material movements need to be speedy, reliable, and consistent in a cross-border business exchange process. It is virtually inconceivable in today’s economy for a firm to function without efficient and effective logistics. It will not be an exaggeration to call logistics the backbone of a county’s economy at both macro and micro levels. In the future, logistics will assume a greater role in using scarce resources judiciously and in releasing them for a more productive usage to improve the margins. Logistics no doubt has a great future, and it is at the centre of world trade.

In Indian context, due to liberalization of the economy, trade and commerce activities have witnessed a manifold increase. Many foreign multinational firms have started trading activities on Indian soils. They have outsourced their distribution activities to logistics firms. Even among Indian companies, logistics outsourcing has become an accepted trend for the following reasons:

• Cost saving
• Focus on core business
• Paucity of funds
• Reduction in liabilities
• Wider geographical coverage
• Cross-pollination of better available practices.

The future of logistics in India is very bright provided the issues such as abolition of octroi levy, ratio­nalization of customs formalities, privatization of ports, improvement in road and rail infrastructure, creation of modern warehouse facilities on scale economics, and creating cold chain infrastructure are taken care of through government initiatives with proper policy formulations. With implementation of the WTO directives, logistics services will be in great demand in the future. This is evident from the fact that third party logistics service providers have proliferated in India after the economic liberalization in 1991. Fast Moving Consumer Goods (FMCG), consumer durables, retail chains, food processing, pharmaceuticals, electronic goods, and automobile industries are major drivers to logistics activities in India.

India is geographically well positioned to emerge as the single largest sourcing hub for a wide range of products—lifestyle, pharmaceuticals, chemicals, intermediates, perishables, machinery, and auto­mobile spare parts to mention a few. There are huge opportunities for Indian exporters and logistics service providers to explore the benefits from the close relationship that augers well for both. At a macro level, India is spending 13 per cent of its GDP (India’s GDP at Rs 46,93,6.02 billion—USD 1173 bn— during 2007-08, as per the Economic Survey for 2007-08 presented in Parliament by the Finance Min­ister) on logistics. The planned growth of 6 per cent per annum in GDP in the eighth Five Year Plan, speaks of the future scope of logistics and the role it has to play in years to come in the Indian economy.

Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.