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Cost Inefficiencies in the $160 bn Indian logistics industry

Monday, July 16, 2018

Gautam Prem Jain, Co-founder and CEO,

Based on studies done and data collected over time, it has been established that India’s logistics cost as a%age of its GDP is almost double than that of the developed countries. While developed countries have the number around 7 to 8%, India pays around 13-14% of its GDP as logistics. Initiatives are being made by both Government and private players to tackle cost inefficiency, however, we are still miles away from the solution.

The major reason for high cost is the unorganised supply. Whether it is road, rail, river, ocean or air, the fragmentation in supply and lack of integrated systems to control it, is the primary reason of mismanagement resulting in high costs. To deliver product from factories to consumers, manufacturers need to tackle lots of brokers and transporters to get a vehicle in time and at a reasonable cost. If the customers are in another country, then to ship the cargo from the port, they have to further deal with the Custom House Agents (CHAs) and freight forwarders. This leads to a lot of ambiguity in actual prices and manufacturers end up overpaying.

Other reasons leading to cost inefficiencies are underdeveloped material handling infrastructure, below par warehouse management, multiple policy making entities and lack of integration with modern information technology. Along with increasing the cost, these reasons also lead to delays in delivery in up to 70% of the transactions which again boomerangs back to cost increase.

The Government has taken a major step with the implementation of GST to eradicate all hoax regulatory agencies and centralise decision and policy making. There are also proposals in the pipeline to introduce integrated logistics digital portals to automate procedures and bring everything under one roof and improve efficiency. Multiple private players have also lead the digitisation brigade for domestic logistics to map supply, increase its utilisation and bring down costs.

In the international freight sector, companies like GoComet are pioneering the digitisation movement. By providing a tech platform to the manufacturers in different industries in order to manage and procure their global freight, GoComet has identified a solution which can be scaled to all exporters and importers.
Sun Pharma in Pharmaceuticals, VVF and Galaxy Surfactants in oleochemicals have brought down their direct cost by upto 8%. They have managed to achieve visibility of quotes in daily transactions, transparency in audit within a company, automation of interaction (with external vendors), negotiation, reporting, leading to a further decrease in man power and thus reduction in indirect cost. Other companies which are market leaders in metals, adhesives, pharmaceuticals have also adopted GoComet.  

It is GoComet's earnest resolve to reduce costs in logistics and to get companies to be more competitive and add more to their bottom line.

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