By Jakob Friis Sørensen, MD, APM Terminals Pipavav
The last decade of twentieth century was marked by growing international trade and globalization that boosted cross-border investment while integrating developed and developing economies across the World. In fact the last few decades have seen emergence of Asia as powerhouse of development as countries like China, India, Vietnam, Indonesia, Thailand and Philippines emerged powerfully after the Asian crisis. These countries not only spearheaded global trade, but also improved their ease of business processes to take on developed nations. Apart from boosting their presence in international trade, these countries also made their presence felt in the manufacturing sector through adoption of advanced technologies at lower cost compared to developed nations.
However, except for China, all other countries are still on the nascent stage of logistics developments and have more to go before they can call themselves self-sufficient and net exporters of goods and services. Considering the fact that over 90% of world trade is transported by sea, the entire maritime sector plays an important role in the growth and development of an economy. The maritime sector’s growth is positively co-related with an efficient and robust logistics ecosystem that drives the movement of domestic and EXIM goods. India has been long working on improving the last mile connectivity to bolster the movement of goods within the country. Bharatmala and Sagarmala projects are examples of Government’s efforts to make the logistics sector more efficient and resilient.
The sector is evolving primarily due to factors such as development of businesses through strong e-commerce mechanism, technological disruptions and evolving third party operators that are becoming game changers for the industry as a whole. Knowing the significance of the sector in growth of trade, the Government of India is working on National Logistics Policy (NLP) to ensure seamless movement of goods across the country and strengthen the supply chain.
The logistics is one of the pivotal sectors for the country’s growth and economic development on the back of over 6,000 km of mainland coastline. When the Government is coming out with a policy that aims to further give a fillip to the sector in terms of growth and employment opportunities, it is imperative that the policy is framed considering the inclusive growth of all the stakeholders involved. For this, the policy has to improve the last-mile connectivity through fastened infrastructure development, particularly in the road sector. In order to improve the last mile connectivity, the Government has launched one of the most ambitious infrastructure program, National Infrastructure Pipeline (NIP) that aims to develop road, rail and port sectors of India, create jobs and improve ease of living. Apart from stronger road infrastructure, simultaneous focus is required on pushing railways for faster and cost-effective movement of goods between the ports and the hinterlands. The development of dedicated freight corridors east and west (DFC) is a step in this direction, in fact a Game-changer for reliable supply chains.
Post-Covid, there cannot be a more opportune timing for the roll-out of National Logistics Policy as the country is also likely to see completion of DFC, which is being developed exclusively for freight traffic movement to decongest the already saturated road and rail network. Apart from improvement in connectivity through development of DFCs, the logistics sector also needs adoption of technology that will shorten the process of cargo movement in and outside of port. Despite the country having so many ports, congestion at few ports is an example of how the country needs to improve the last mile connectivity with other ports. For the government, another challenge is to move cargo movement from west to south or north and from east to north and only through relying on better rail network this can be achieved at a competitive cost.
Cost-minimization & supply chain resilience
In sync with this objective of developing world-class infrastructure, National Logistics Policy is also expected to be framed with the objective of cost minimization and making the supply chain resilient. An ongoing health pandemic has shown how a supply chain disruption could impact the lives of common people. Though the logistics sector in India has grown by over 12% CAGR in the last decade, there are still interconnected issues that highlights logistical inefficiencies in the sector and needs to be addressed. Inefficiencies in the sector has also led to higher cost, either in terms of traveling to farther ports for EXIM trades or queuing at the nearby ports. However, the congested ports’ average waiting time is far higher than the world average.
It is a well-known fact that the logistics sector in India is defragmented and this has resulted in very high operational cost for the logistics players. India has among the highest logistics costs in the world as per World Bank Logistics Performance Index 2018 and this has severely impacted the global competitiveness of the country in the export market. The fact that the logistics ecosystem has complex interlinking of various stakeholders, bringing efficiency to minimize the cost makes it more challenging.
Digitization & adoption of technology
The one thing that could drastically improve productivity and efficiency of logistics sector is digitization and the players in the industry are adopting technology widely to ensure this. However, the path is way longer for the entire sector to be called digital-savvy in just a year or two. The sector is still slow in adopting to new technologies and applying digitization in its operations. However, with adoption of internet of things and artificial intelligence across the value chain now happening at faster pace, the digitization of the sector looks well within reach.
The digitization will also help the sector in lowering logistics cost and reducing turnaround time of vessels in Indian waters, thereby also bring down pollution. This will also ensure the sector is matching the global standards of adoption of technology and digitization for increasing the competitiveness of the sector as a whole.
India is a great consumption story and to translate this into a good growth story over a longer time period, it is important that the pace of implementation of digitization and infrastructure development is to be hastened. As the country aspires to become the third largest economy in the world by 2030, the significance of a seamless functioning domestic and international logistics ecosystem is a pre-requisite.
Integration of sustainable transport, lower costs and efficiency drives both by infrastructure upgrade, IT solutions and India’s vast leverage of its economic size will be this decade goal to bring about a successful revolution in this field. We are ready to play a driving part in this.
(This article has been written by Jakob Friis Sørensen, MD, APM Terminals Pipavav, exclusively for Sea News)
Sea News Feature, January 8