CARGOCONNECT-JANUARY2025 - Flipbook - Page 89
GUESTCOLUMN
Dr Vikash Khatri
Founder, Aviral Consulting
Riding the Waves of Change: India’s
Logistics Sector over the Past Decade
T
he past decade has been
a transformative period
for the Indian logistics
sector, characterised by
a blend of challenges
and growth opportunities. Key milestones such as the formal recognition
of logistics as infrastructure, the
implementation of GST, and disruptions from COVID-19 have reshaped
the industry landscape. During this
time, technology adoption surged,
sustainability became a focal point,
and the sector prioritised agility
and resilience. As a result, new business
models emerged, and the sector registered
a growth rate of 8%-9%.
Throughout this period of growth,
logistics companies have created signi昀椀cant value for their customers by o昀昀ering
innovative solutions, improving e昀케ciency,
and providing exceptional service experiences. However, the process of capturing
and capitalising on this value is complex,
requiring long-term investment and strategic focus. Companies typically follow
one of two paths: competitive pricing or
superior customer value. Yet, only a few
have successfully extracted profits and
solidi昀椀ed their competitive position, while
others have faced decline.
On a broader scale, while the logistics
sector has made substantial progress in
innovation, infrastructure, and technology, its 昀椀nancial returns and pro昀椀tability
have often fallen short of expectations. The
challenge lies in the varied performance
of subsegments such as express delivery,
e-commerce logistics, and contract logistics.
Each of these subsegments faces distinct challenges, in昀氀uenced by factors such as market
demand, regulatory policies, technological
integration, and investment levels, leading
to diverse outcomes across the sector.
A 10-Year Review of Value Creation
and Capture in Logistics Services
India’s transportation sector is predominantly road-based, with nearly two-thirds
of the market share. Among road logistics,
Full Truck Load (FTL) remains highly
fragmented, with a minimal presence
of organised players. While the market
has nearly doubled over the last decade,
along with technology adoption in fleet
and transport management, startups like
Blackbuck have made attempts to drive the
sector toward organisation, but no signi昀椀cant
breakthroughs have emerged. As a result,
FTL has struggled to create substantial value
for customers, and pro昀椀tability within the
segment has remained stagnant.
The second major segment in road
logistics is Part Truck Load (PTL) services,
where organised players have made gradual
improvements. Companies like VRL and
V-Trans India have established a national
presence, supported by relevant infrastructure and technology. These organised players
have delivered tangible value to customers,
improving pro昀椀tability alongside revenue
growth through a cost-conscious approach.
Rail logistics, on the other hand, has
created signi昀椀cant value in speci昀椀c subsegments, such as container train operators,
private rail operators, and car carriers.
While Indian Railways remains the primary
infrastructure provider, private players
like Adani, DP World, Gateway Distriparks,
and Pristine have experienced pro昀椀table
growth over the past decade.
E-commerce logistics has been the
most hyped segment in the last ten years.
While e-commerce logistics started gaining traction in 2010, it exploded in 2014
with technological advancements and the
emergence of new-age companies.
This segment has grown into a US$6
billion market, creating immense
value by reducing transit times,
improving customer service, and
offering tech-driven solutions.
However, as these di昀昀erentiators
become industry standards, the rate
of value creation has slowed. Despite
signi昀椀cant investments to achieve
profitability, most e-commerce
companies are still either EBITDAnegative or marginally positive.
While they have made strides in
reducing losses, pro昀椀tability remains below
industry benchmarks.
The express logistics segment, largely
controlled by organised players, has also
experienced incremental improvements
in service offerings and customer service. Despite challenges such as declining
document volumes, slow air cargo growth,
and cost pressures, express logistics has
achieved double-digit growth. However, the
segment has failed to create signi昀椀cant new
value, as many di昀昀erentiators have now
become standard o昀昀erings. This inability
to create and capture value raises concerns
for the future of express logistics.
In contrast, the contract logistics segment has bene昀椀ted from complex global
supply chains and the post-GST momentum,
providing signi昀椀cant opportunities for value
creation through optimisation. Organised
players, with their advanced solutions,
technology, and automation, have been able
to capture substantial value in this segment.
Overall, while the logistics industry has
created value across most of its segments,
the ability to capture this value has been
suboptimal. Factors such as technological advancements, sustainability trends,
and evolving customer expectations will
continue to in昀氀uence value creation. However, value capture will hinge on e昀昀ective
pricing strategies, market positioning,
and operational scalability. In the future,
a balance between continuous innovation
and pro昀椀tability will be essential for longterm success in the logistics industry.
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