The Covid-19 pandemic may have hit the SMEs and MSMEs the hardest. For a sector that contributes the maximum to the Indian logistics market – 70% of all shipments –the logistics costs for SMEs have also been historically the highest.
The pandemic and the resultant lockdown aggravated the situation, impacting Indian SMEs the hardest due to their comparatively low financial resilience and higher vulnerability. The impact on 36 Mn SMEs and their 80 Mn employees was unanticipated, forcing around 10 Mn of them to shut down temporarily during the lockdown. During these adverse circumstances, with digitised logistics the SMEs will be a singular force driving the Indian economy back on its feet. Online logistics marketplaces are helping SMEs improve their product movements, attain higher efficiencies, and reduce costs.
The impact of the lockdown was on multiple fronts. It hurt the demand for products, caused unwanted disruptions in supply chain, grounded airlines, restricted road transport, locked down border, and similar other obstacles, all impacting operations and sales.
According to a survey of MSMEs by Endurance International Group, a third of MSMEs started e-commerce and web-enabled services and saw their ecommerce revenues rise up to 63%. To a majority of small businesses, it showed that digitisation – or even a digital presence – could quickly bring back some sort of normalcy and provide continuity in serving or engaging of customers.
One thing the COVID-19 pandemic exposed is the vulnerability of SMEs and MSMEs to unanticipated pandemic like crisis, which in turn was due to the absence of digital expertise among small businesses, and a similar lack of digitisation in the overall logistics ecosystem.
Fortunately, India is seeing a surge in online logistics management platforms that are making things not only easier but also providing a level playing field for SMEs and MSMEs. Although digitisation started much earlier, the pandemic showed the way to a large number of small businesses to switch to smart and intelligent software that makes their shipment logistics faster, efficient and cheaper.
For SMEs already dealing with razor thin profit margins, efficiency in logistics planning becomes crucial in keeping the costs down. Lower cost not only helps enterprises increase margins but also get more business by being competitive globally.
Some of the biggest challenges digital logistics management platforms are effectively tackling are of inefficiencies and high costs. These happen with complications in freight rate procurement, non-standardized quotes from multiple vendors, hidden costs, and lack of accurate tracking and shipment updates. All of these have historically resulted in shipment delays that increase costs and cause loss of sales due to inventory stock-outs, and penalties imposed due to delayed deliveries.
Digitisation and logistics management software platforms are reducing cost by providing competitive bids from multiple vendors, made possible by bringing together a community of trusted vendors on one single platform. The man hours spent in seeking and sorting through quotes from multiple freight forwarders, their segmented rates, cost items and variable charges, is hugely saved on a digitized platform.
Digital platforms are providing hassle free, transparent and standardised online freight quotes that eliminate hidden costs, provide an all-inclusive international freight rate and reduce the stress on resources and time.
Digital platforms are helping small businesses automate their workflows by standardizing their processes. This is proving to be another cost reduction tool because of efficient and timely deliveries that avoid penalties.
Add to that, it reduces employees man hours spent in managing multiple freight forwarders, co-ordinating shipments – even multiple shipments – which instead he spends on his core business area. Digitisation and software offer simplified, single window dashboards that use technology and data driven processes to manage multiple orders in a hassle free and efficient manner.
Digital logistics platforms keep track of the shipment in real time, which has not been the case with most unorganised freight forwarders who have little or no means to track and share regular shipment updates. Digital platforms are tech enabled to provide automated regular updates on shipment status as well as estimated delivery times.
One of the most valuable offering of digital logistics platforms is its capability to forecast. SMEs often lack insightful data to chalk vital details of past shipments. The data include frequent destinations, frequently used sea or air freight forwarders, average delivery times, average weight or volume of shipments, quantity, type of material, preferred mode of transport and average costs per shipment.
The absence of data makes small businesses pay higher prices and frequent discrepancies in final invoice costs. A logistics platform manages this through a data driven approach, enabling SMEs to acquire customised costs and eliminate variability, with little to no scope of hidden charges.
In totality, digitised logistics platforms can dramatically reduce costs and raise efficiencies through an intelligent data led management of processes. Digitisation thereby enables small businesses to focus their attention, time and resources on their core competencies. It reduces logistics from being an expensive and time consuming job to a cost saving and efficient function needing minimum man power. It eases the burden of planning and supervision and helps dramatically control costs, increase customer satisfaction and boost revenues.
To the country as a whole, the digital transformation of logistics has the potential to have far-reaching payoffs, in bringing the Indian economy back to its feet in a short term and futuristic in the long run. This is the result of several technological disruptions coming together to create powerful tools that are reshaping logistics management.
An expanding digital consumer base coupled with inadequate and ill-planned infrastructure facilities has left India trapped between growing demand for logistics services on the one end and a fragmented logistics services market on the other.
Given the potential for significantly higher value to be created for the Indian economy, the logistics sector is benefiting from a concentrated and collaborative effort of each stakeholder, including infrastructure providers, terminal operators, logistics service providers and technology companies. The time has come for the backbone of Indian economy – the SMEs and MSMEs – to get onto digitization as a matter of duty.