Logistics Industry IT Demand To Cross Rs 1000 Crore By 2013

The IT spend in the Indian logistics industry will grow to approximately Rs 1,000 crore from the existing Rs 400 crore in the next five years (CAGR of 20–22 percent) revealed the ‘Technology Survey for the Indian Logistics Industry – 2008’ conducted by Kale Consultants in partnership with Feedback Business Consulting Services. The demand is expected from the western part of India followed by the north and southern regions. Currently, 46 percent of the IT investments are made towards capital expenditures and the remaining 54 percent in operational.

The key objective of the study was to assess the market dynamics and highlight the technology adoption trends in the logistics industry. “There is a lot of activity happening in this highly fragmented market and the trends are quite revealing. 3PL players are growing at over 25 percent. Small and medium family-owned enterprises are growing in stature in the integrated logistics space. Global majors have committed to huge investments for their Indian operations. PE funds are increasingly eyeing the sector. The sector has already attracted investments of over Rs 20,000 crore in the first half of 2008,” said Sumeet Nadkar, head-Logistics SBU, Kale Consultants.

More from Biztech

Future Group - Reliance Retail Deal approved by CCI RBI ban on cryptocurrencies takes effect; prohibition could force investors to tap the black market

Key Findings

Freight Forwarding

Technology spend in freight forwarding is expected to grow by 160 percent. This industry presently constitutes 14 percent of the IT demand and is expected to rise to approximately 170 crore (17 percent of overall IT spend by FY 013). The market size is currently at Rs 11,000 crore and is expected to reach Rs 21, 180 crore by FY 013.

Airports

Current IT spends by airports is estimated at approximately 1.1 percent of the overall revenues. New investments of Rs 28,525 crores are expected in the next four years to boost the IT requirement. This is one of the segments where IT utilisation is maximum compared to other segments in the logistics space.

Warehousing

Technology spend is expected to jump from the current Rs 48 crore to about Rs 120 crore by FY 013. This industry is fast emerging as a strategic function, thanks to rapid growth in retail and expansion by domestic and international players. This requires end-to-end solutions that improve efficiencies in supply chain management. The market size is currently at Rs 3000 crore and is expected to reach Rs 7,380 crore by FY 013.

Express and Courier Services

This sector will continue to remain the largest technology buyer constituting to 33 percent of the technology spend by 2013 from the present 29 percent.

Radio Frequency Identification

RFID is expected to grow rapidly with nearly 80 percent of the respondents indicating that they will be adopting the technology (despite cost concerns). The demand will primarily be driven by their overseas customers and the domestic retail boom. The ICD/CFS market size together is currently at Rs 6,500 crore and is expected to reach Rs 12,515 crore by FY 013.

“Technology is expected to be a key enabler to support the logistics sector in its growth. Influx of capital in the logistics value chain will also depend on the ability of the stakeholders to deploy technology in improving their processes and functions. Investment in technology is expected to result in higher utilisation of assets like truck fleet, warehouses, co-ordination of cargo movement, etc. Improved customer satisfaction using new generation technology will shape the growth of the logistics industry. Thus, technology will not only improve efficiencies but is likely to result in higher outsourcing by end user segments,” said Nadkar.