national logistics policy: National Logistics Policy: The intentions are right but will execution be?

Last Saturday Prime Minister Narendra Modi announced the National Logistics Policy (NLP). To put it simply, logistics is the multimodal organization and movement of goods from the point of origin to the point of consumption. It includes the procurement of raw materials and parts, production-related transport and delivery to the consumer directly or via intermediaries.

Logistics costs are 11-12% of GDP in Europe, 10% in the US and less in China and 13-14% in India. A detailed analysis was initiated by GoI to provide a framework for regular future measurements. Systematic improvements can incrementally increase speed, reduce waste, lower costs and increase our competitiveness. Typically, sea freight has longer delivery times, is multimodal, intended for large volumes and is the most environmentally friendly. Air freight is much faster, with tighter deadlines and higher levels of security. Both are well suited for international transport.

Road freight transport is ideal for door-to-door transport of goods nationally, but is subject to size and weight restrictions. Trains can carry dozens of wagons, are less affected by the weather, and are well suited for long-distance deliveries. Statista’s cost estimates per tonne-kilometre are £18 for air freight, £3.60 for road freight, ₹2 for waterways and ₹1.60 for rail freight.

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About 95% of India’s trade in goods is handled through seaports. But the average turnaround time in our major ports is 2.5 days, behind the global average of 1-2 days. Private and government ports are now rated on multiple parameters such as logistic time, demurrage cost and unloading time. This encourages rapid digitization, including document automation, mobile apps, use of Radio Frequency Identification (RFID) and online payments.

According to the World Economic Forum, 85 million packages and documents are delivered worldwide every day. Disrupting logistics with digital innovation could unlock $4 trillion in value. How Amazon has anticipated events, executed with precision, and outmaneuvered competitors during the pandemic offers many lessons on how to unlock that value.

Amazon’s sales grew from $280 billion in 2019 to $469 billion in 2021. During the same period, logistics costs rose from 28% to 32%, an increase of nearly $72 billion. A longer term, digitally supported strategy is at play. This includes gaining control over more logistic modes and nodes to avoid stockouts, minimize external dependency on deliveries and limit payouts to external entities. Artificial intelligence (AI) and analytics engines now predict what goods consumers will buy in different markets, place bulk orders to get the best prices, and decide the optimal route.

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By 2021, Amazon — which became a global carrier in 2017 — was shipping 72% of its own packages, collecting data at every stage and dynamically intervening hourly to avoid costs or shipping failures. The company owns 50,000 semitrailer trucks for onward transportation to 185 fulfillment centers worldwide, over 100 in the US alone. Since 2016, Amazon has been leasing long-haul aircraft to transport its highest-margin goods.

At the heart of Amazon’s digital network are 64 software development centers, including in Bangalore, Hyderabad, New Delhi and Chennai. “Digital twinning” – creating a virtual replica of all elements of its logistics chain in the physical world, updated with real-time data – helped identify the interventions needed.

Scope and scope vary greatly when it comes to a nation’s logistics. However, India is also looking for a data-centric, integrated, multi-modal approach to accelerate logistics transformation. This $160 billion sector employs 22 million people and includes 10,000 commodities, 20 government agencies, 37 export promotion councils, 200 shipping and 36 logistics services, 129 inland container depots, 166 freight stations, 50 IT ecosystems, and several banks and insurance companies.

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To facilitate integrated infrastructure planning and implementation, GoI launched the PM Gati Shakti Scheme (PMGSS) in October 2021. This brings together 16 ministries, including roads, railways and waterways. It includes various current development initiatives including Bharatmala Pariyojana for roads, highways and expressways, SagarMala for port development and UDAN (Ude Desh ka Aam Naagrik) for improved air links. It will make extensive use of spatial imagery and planning tools. Projects worth ₹1.22 lakh crore were approved under PMGSS, with a 20-strong empowered group of secretaries formed to oversee this.

The new NLP was formulated to ensure holistic augmentation. Digital acceleration initiatives include the integration of digital systems (IDS) to integrate information related to road, rail, customs, aviation, foreign trade and commerce; Unified Logistics Interface Platform (ULIP) to standardize transport services and monitor smooth freight traffic; Ease of Logistics (ELOG) to simplify the rules; and a System Improvement Group (SIG) to monitor progress and remove system-related roadblocks. The intention of NLP is correct. As always, success depends on execution.

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