It is well known that Indian Logistics sector is enjoying a robust growth. According to a recent Datamonitor report, ‘With India’s gross domestic profit growing at over nine per cent per year and the manufacturing sector enjoying double digit growth rates, the Indian logistics industry is at an inflection point, and is expected to reach a market size of over $125 billion in year 2010.’

However, the report also says, ‘As a result of the under-developed trade and logistics infrastructure, the logistics cost of the Indian economy is over 13 per cent of GDP, compared to less than 10 per cent of GDP in almost the entire Western Europe and North America. The Indian logistics industry is characterised by dominance of a disorganised market.’ Thus, it goes without saying that we need to put stitches in time. But, how do we do that?

In the recent CII-Logistics 2007 Summit held in Chennai, R Narayanan, Director - KPMG Advisory Services, said, ‘Currently, road freight rates in India are one of the lowest worldwide. Two-thirds of the overall logistics costs arise from transportation and warehousing. However, 86 per cent of the road transportation sector is dominated by the unorganised sector with a plethora of very small players, with a turnover of less than Rs 30 lakh per annum. Many of them are single truck owners. Intense competition among these players leads to low freight rates and hence low profitability.’

Thus, we need to look for the ways to organise these stray operators. Concept of co-operative logistics service has to be brought into effect to consolidate this major chunk of the sector, in order to improve the service standard, make it profitable for the operators and to train the operators on the modern logistics management technologies.

Lack of proper infrastructure is yet another problem. However, that area is being addressed, and it will take time. Then, don’t we have scope for improvement within this existing constrained situation? The answer is ‘yes’. We have to improve the fleet control mechanism and supply chain management through adoption of ICT (Information and Communication Technology). Both public and private sectors have to initiate the process jointly. In this service industry, efficiency is the only key to success.