Caused by Logistics & Transportation sector Challenge in India
The logistics sector is the backbone of an economy. In India, Most of the retail, automobile & pharmaceutical organizations outsource their logistics department to third-party logistics (3PL).
It is one of the busiest sectors in the country. Annually there are 2.2 million heavy-duty trucks and 0.6 million light-duty trucks covering more than 18, 00,000 km of length.
Logistics & Transportation Challenges:
The logistics sector in India contributes to around 14% of the total GDP of the country, which is higher than in the USA and many European countries. For a developing economy, such a high share of GDP in the logistics sector is deemed unhealthy.
When we compare with BRIC nations, the ranking for other countries in the logistic sector index is constantly improving. According to the World Bank’s 2014 logistics performance, India is positioned at 54 much below other countries like South Africa.
There are plenty of reasons for the poor showing of India in
this department. Poor networks of roads, inadequate air & seaport capacities along with undeveloped railway networks are hindering the growth of this sector.
This leads to slow & inefficient delivery of the product to the customers. The turnaround times are also high due to heavy congestion on berths and slow evacuation of cargo unloaded at berths. The high cost of fuel & high waiting times negatively impacts the logistics service sector.
The transportation industry is also severely unorganized. The employees of this sector have inadequate skills which leads to an inefficient supply of goods. Low levels of technology and poor maintenance of the tools are also responsible for the inefficiency of the transportation industry.
The warehouses are mostly run by small or medium players with small capacity therefore poor handling and management takes place
Overcoming the challenges:
To improve the state of the manufacturing sector, strong emphasis is being given to the logistics sector. Cost-cutting in the logistics sector is one of the most critical aspects of improving the shape of this sector. According to a study, if the logistics cost is brought down from 14% to 9% of the GDP, India can save roughly $50 billion.
The government in order to cut down the cost has proposed to set up multimodal logistic parks across the country. 15 parks have been proposed in the first phase which has the highest freight movement which will solve key functions like freight aggregation & distribution, multimodal freight movement, storage and warehousing, and value-added service such as customs clearances.
These parks are a part of an initiative called the Logistics Efficiency Enhancement Program (LEEP) which was initiated to improve efficiency and cut down the logistic cost.
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These parks will cover approximately 5000 acres at an approximate cost of Rs. 33,000 crore. The multimodal hubs will be critical in shifting goods from one mode of transport to another with less wastage of time and cost.