Technology Adoption Drives Logistics Business Success: Report

Kale Consultants, a technology solutions provider to the airline, logistics and travel (ALT) industry, has announced the launch of the detailed report on ‘Technology Adoption Index for the Logistics industry’ (TAIL). The report includes a detailed study covering over 235 companies and is an attempt to arrive at a simple integrated measure of technology adoption in the Indian logistics industry. The index will now serve as an industry benchmark for logistics companies to derive their technology effectiveness and business competitiveness.

The inaugural TAIL study offers a snapshot view of the state of technology adoption in the Indian logistics industry. TAIL captures information on how much technology do firms use, how they use it and how they manage technology in a single comprehensive quantitative measure. TAIL combines the dimensions of IT penetration, sophistication and maturity of adoption into a simple index that can be used by firms to benchmark their progress.

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Kale’s ‘Technology Survey for the Indian Logistics Industry’ pointed out that only 0.26 percent is spent on IT by the logistics ecosystem as against the global standard of 2-3 percent. This low level of spend on IT is among several reasons for the high cost of running the logistics business in India. The TAIL index focuses on the reasons behind the low spend (and the low level of IT adoption). The TAIL index goes a step beyond in relating the level of adoption to the business benefits that have been experienced by the logistics industry. The TAIL index can be used as a benchmark by the logistics service provider in ascertaining the IT spend and the benefits from the investment.

In the Indian logistics industry, only less than 10 percent of work is outsourced by the shippers and there lies a huge potential for improving productivity and hence the growth. Even more, less than 1 percent of the industry is organised and there is lack of industry-wide standards, processes, and established technology solutions that creates an opportunity to establish the benefits of technology.

Vineet Malhotra, Global Head-Marketing, Kale Consultants, said, “The study highlights that increased technology adoption is a clear driver of growth for logistics companies. Instead of waiting to reach a certain size before IT can become affordable, players who push themselves ahead on technology adoption have a clear chance of success.”

Some of the key findings of the study are as under:

ä Staff productivity goes up with higher TAIL for both asset and non-asset based providers. A mere increase of 5 pts in the TAIL index over average for LSPs can result in more than doubling of staff productivity.

ä Technology adoption is much more skewed in non-asset based logistics service providers (around 15 percent above average TAIL score) as opposed to the asset-based players (over one-third above average of the group).

ä Asset-based players with an average TAIL of 52 are ahead of non-asset based players at average score of 45.

ä The industry has moved to a high level of usage although the range of processes covered by IT and the integration of discrete systems across the business is nowhere near optimal. There is a strong need felt for home-grown solutions that fit the needs of Indian players.

ä The industry sees IT as important to their operations (average criticality score of 3.77 on 5.0).

ä However, the low score for dependence on IT criticality measures underlines the lack of a central role for technology as a business enabler.

ä Revenue, staff size and geographic spread of operations are all positively correlated with technology adoption (higher TAIL).

ä Age of firms has no relation to technology adoption. So there are large, established firms yet to graduate to increased use of IT and smaller firms too that are reluctant to use IT.

To receive the detailed report of the inaugural ‘Technology Adoption Index for Logistics Companies’, please write to logistics@kaleconsultants.com