8 Major Challenges Faced By Logistics Companies in India
The estimated value of global logistics industry is to be worth 300 Billion USD. In India, around 10 to 15% of product cost can be attributed to logistics, which is comparatively significant from other economies like USA or China. Logistics companies in India are fast evolving, but this progress does not come without challenges. Let us take a look at a few hindrances faced by businesses in this industry:
1. Transportation Issues
In India, a predominant mode of freight cargo transportation is via road, with nearly 60% cargo moved by road and 32% by rail. Due to over-saturated rail networks and high rail tariffs. Movement of goods is done by road transportation, which proves to be quite inefficient, because of poor road infrastructure, multiple checkpoints, and congestion.
2. Port Sector Issues
Due to high turnaround times for ships because of overcrowded berths and delay in cargo evacuation unloaded at berths, logistics companies in India suffer unreasonably. Coastal shipping in India gets hampered due to the weak land side and port facilities, and insufficient depth at ports discourage large vessels, thus curbing the large scale use of it for freight movements.
3. Tax Structure and Warehousing Problems
The complicated tax regime places several hardships on logistics companies in India. Multiple State and Center taxes lead to considerable loss of time in transit on roads. The poor state of warehousing and their restricting locations are one of the few major concerns of this industry. Storage facilities are quite fragmented for low margin products thereby resulting in a disincentive to create a large integrated warehousing space. The Government owned most of the large warehouses and used for food grain.
4. Technological and Skill Deterrents
In India, automation of processes is still in the embryonic stage and non-standardization in the industry due to its fragmentation further slows down the progress. Acceptance and adoption of technological advancements like RFID, tracking, warehouse management system, etc. can resolve the issues between domain requirement and IT. Besides this, there is lack of quality workforce in this sector, and the available skill set needs to be upgraded urgently.
5. Fuel Costs
The highest challenge in logistic industry is high fuel costs. If the fuel prices goes high is likely to increase transportation costs to the shippers. Raising the fuel prices are increasing the surcharges added to freight rates, this will cut down the revenue and earnings of truckers as fuel prices increase.
6. Customer Services
Customers want the full clarity into where their delivery is at on time. Now a days, the location of a shipment is as
associated as your social network. In fact, the customer anticipation have increased, their readiness to pay for speedy shipping has declined with just about 50% of consumers not in the mood to pay anything excess for less than two-day shipping.
7. Driver Shortage & Retention
Employment and detainment of the driver will be an issue despite the lower demand of the shipments.
8. Government Regulations Carriers face significant compliance regulations imposed by government of state and other authorities.