RFID, GPS, Mobility Solns To Gain Significance In Logistics Industry

The overall IT spending of the logistics industry is expected to grow to approximately Rs 1,000 crore from the existing level of Rs 400 crore within the next five years (growing at a CAGR of 20 – 22 percent), according to a recent technology survey conducted by Kale Consultants and Feedback Business Consulting involving the Indian logistics industry.

During an event held to celebrate the addition of the 100th customer to the company’s client portfolio, Kale Consultants, an IT solution provider for the airline, logistics and travel industry, launched a detailed survey report on the IT usage practices, spend levels and future trends in the Indian logistics industry. Vipul Jain, CEO and MD, Kale Consultants, told Biztech2.0, “When we wanted to extend our offerings to the logistics industry, we could not find any reliable information or research about this industry and hence, the thought of undertaking a technology survey on logistics industry came emerged”.

The survey was carried out over a period of two months across twelve cities in India. More than 450 respondents were interviewed from various key segments within the industry.

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The Indian logistics industry comprises freight forwarders, 3PL (3rd Party Logistic) service providers, freight providers across modes like road, rail, sea and air, courier service providers, express industry and warehousing service providers. The size of the logistics industry in India was estimated at Rs 2,44,455 crore for FY 07-08. At present, the logistics industry in India is highly fragmented with presence of many unorganised enterprises.

The report claims that the size of the IT solutions market in the logistics industry was around Rs 400 crore for FY 2007-08. This however, does not include the apportioned value of spend on in-house solutions. Western India is the largest market for such solutions followed by north and south India.

The logistics sector is increasingly adopting a mix of ‘plug and play’ and integrated IT solutions to streamline operations, build efficiencies and enable accelerated growth. The IT solutions market in this sector, though nascent, is rapidly evolving to meet the growing needs of a cross section of firms in this domain. A gamut of applications driven by the need for streamlining operations and business processes is driving the adoption of IT among logistics service providers. In addition, increased customer expectations of ‘just in time’ deliveries and tracking systems have fueled the need for e-commerce/ Web based solutions and RFID tools. IT is expected to be the harbinger of growth in the next phase of evolution of the Indian logistics sector.

Key Contributors of Growth

Airports is one of the segments where IT utilisation is maximum compared to other segments in the logistics space. Current IT spending by airports is estimated at approximately 1.1 percent of overall revenues. This segment uses integrated software i.e. cargo management software. New Investments worth Rs 28,525 crore are expected in this segment in the next four years to meet the growing IT requirements.

All major ports in India also use integrated ERP solutions customised to their specific needs. Current IT spending by ports is estimated at 0.35 percent of the overall revenue and is expected to increase to around 0.4 percent by FY13.

The size of the overall warehouse industry is estimated at Rs 3,000 crore. While state- and centrally-owned government warehouses do not use any application software, 70-80 percent of company-owned warehouses are integrated with ERP systems, which are centrally installed. Current IT spending by this segment is estimated at 1.8 – 2 percent of the overall revenue and is expected to increase to 2 – 2.05 percent by FY13. Changing practices and need for better methods of tracking and handling of products stocked in the warehouses will trigger the need for IT, the report observed.

In the case of small players, usage of software is very low as most players are currently in the process of developing their basic IT hardware systems. Large players with an extensive and distributed infrastructure are also increasingly investing in a reliable network infrastructure to ensure seamless, on-time delivery of services to customers. Though this market traditionally lacks the presence of large IT players, leading Indian software firms are gearing up to make a foray into this market segment with globally accepted and adopted solutions. This is expected to provide a fresh impetus to the growth of the logistics IT solutions market in India.

Key Future Trends

Jain believes that technologies like RFID, GPS, and mobility will have a significant role to play in the logistics industry. “The software-as-a-service or SaaS model will also gain momentum as small logistics providers are not capable of making upfront investments in technology,” he said.

Warehousing, CFS, ICD are the most likely segments to adopt usage of RFID driven by their overseas customers. RFID will provide major help in tracing shipments across the supply chain under various sub-sectors of the logistics industry. Multi-national customers will demand more visibility and transparency that can be achieved through Web-based integrated solutions. Usage of mobile technology will be high in Fleet Management i.e. tracking of the fleet via GPS. Software addressing end-to-end business needs of logistics companies will gain prominence. The industry will need more one-stop shop solutions inclusive of hardware, software, network, RF services etc.