Logistics – High time for the much needed improvement

Logistics is undoubtedly the backbone of the e-commerce industry. What should ideally be a support for the growth of the industry is proving to be more challenging in various aspects. In addition to the geographical limitations and challenges owing to different terrains across the country, inefficiencies and ignorance of logistic players are hampering the growth of e-commerce in India.

In order to smoothen operations and avoid delays due to rough roads and inefficient railways, etailers began depending on airlines to transport packages. Cabins of commercial airlines became the carriers of customer packages. However, these packages are getting bumped off now to accommodate passengers.

Although home grown e-commerce giants like Flipkart and global players like Amazon and eBay are racing to widen their delivery networks and investing millions to develop their own logistics channels, they are still dependent on airlines for transferring packages.

“It is unfortunate, but offloading does happen and we have to make sure our delivery promises take that into consideration,” Rahul Chari, vice-president, supply chain technologies at Flipkart, reported ET.

Logistics scene in India

Although e-commerce is expected to get a boost next month when the government will allow online retailers to sell directly to consumers, logistics in India will still be a problem till the challenges and limitations are eased out.

  • Around 90% of products ordered online are transported by air.
  • This leads to increase in delivery costs by 50%.
  • Road and railways are underdeveloped and timely deliveries will not be practical, hence it is not possible to depend on them.
  • Online retailers are forced to rely on unreliable third-party logistics players for deliveries.

“The biggest advantage of e-commerce is the instant nationwide reach it enables sellers of all sizes, however, it is the delivery of that opportunity that requires significant focus and investment from the industry,” Amit Agarwal, Amazon’s vice president and country manager, according to a Reuters report in TOI.

How are online retailers managing now?

Online retailers with the means to do so have started concentrating on building their own capital-intensive logistics businesses.

Flipkart has built and is expanding its own logistics arm, E-Kart, so that they can keep control over deliveries and customise services as per requirements. Also, Flipkart has set up regional warehouses and tied up with more local suppliers in order to enable faster deliveries to customers from various regions. Thus, by avoiding a third-party operator, they are able to lessen time for:

  • delivery rescheduling requests
  • product returns
  • exchange of products

Amazon is pumping up Amazon Logistics, in addition to partnerships with logistics players like GATI, Blue Dart and FedEx Corp. Also, it is building its own warehouses and doing trial tie-ups with kirana stores and petrol stations as pick up points for customers. Far flung areas in the country are catered to with the help of Indian Postal Service.

eBay, however, depends on third-party logistics players to reduce multiple state taxes shipped by road and the excessive documentation for every parcel. To improve efficiency, it trains its 45,000 strong supplier base.

“In this business, it is important we do what we are good at and let our logistics partners do what they are good at,” said Latif Nathani, eBay India’s managing director.

Some online players that don’t have the resources like Amazon and Flipkart to build their own logistics solutions, are altering their product lines and range to reach customers through road and rail. Pepperfry, one of the largest online furniture and home products retailer, has started training suppliers to manufacture knock-down, foldable products like IKEA. This helps to reduce costs as shipping costs of flat goods are lesser.

What can an Indian Online Seller do to face logistics challenges?

According to industry experts, logistics companies have recognised the significance of e-commerce boom and the need for improvement. However, any changes that may come about will take time.

In the meanwhile, it is wiser to adapt to the ailing infrastructure like Pepperfry is doing to take advantage of the booming business. Physical infrastructure like roads and railways are not going to improve anytime soon, so try to work around it and improvise on the product line as road transport is most viable for surging volumes.

If you are selling through marketplaces, you can bank on the efforts taken by them to ease out logistical challenges.

 

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