Top 9 reasons for increased cost & inefficiencies in Logistics and Supply Chain

India has one of the highest ratio of Cost of Logistics to the GDP at 14%. The Government ministries and various Industry bodies have been strategizing and finalizing various projects that are focused on bringing the costs and inefficiencies to sub 8-9% of GDP, and to be on par with the developed countries. Some of the ambitious projects that are underway are the Bharatmala, Sagarmala, Udaan, Direct port to Door (DPD), Dedicated freight corridors, Inland Waterways, Coastal Shipping, Airports and Seaports, Logistics parks etc. Also uniform taxation like GST, Industry status for Logistics have been very impactful initiatives and stakeholders are deriving benefits of the same. However if one were to dis-passionately look at the sector, it is apparent that while the administration implements and does their bit, the stakeholders also need to be educated, aware and need to take appropriate action to reduce their costs at their unit level from their end

Top 9 reasons of Inefficiency and Cost escalation at Shipper or Cargo owner end (firm /enterprise) as regards Logistics and Transportation:

1.Multiple Modes of Transportation:

Firms or companies have movement of Raw material to their facility or finished goods going out from their facility. Therefore their goods are handled by multiple modes of transportation, warehouses and geographies. As a result of multiple hand-offs and agencies dealing with the goods, there are mostly no standard operating procedure, a single dashboard or window to monitor this throughput through to the consumer point. Delayed time, higher management costs gets baked into the final Logistics costs. The solution could be, the Shipper or Cargo Owner could partner with a Digital Multimodal Freight Player and get this deficiency marginalized with integrated SOP and transformational technology.

2.Availability of Trucks / Trailers:

Being a largely Agro driven economy, over 55% truck assets are designated for movement of Agriculture related goods. There are seasonalities in the Agri-produce and there in their shipment schedules across geographies, which the transport fleet owners plan to have coverage and optimized movements. This leads to a skew in the requirement for the right Truck Asset availability for transportation, for Shippers. Also there is a last week of the month phenomenon, whereby most Shippers are hard pressed to dispatch wholesale numbers and there are serious Truck availability issues. Most Logistics personnel are not sensitive to these factors and unable to plan for smooth operation. Also in most cases Long term Logistics Partners selected through RFQ process may also fail in Truck / container placement. Digital Freight platforms have a larger Aggregation universe and would be in a better position to handle these fluctuations with a professional Logistics team to handle any exigencies at no extra cost.

3.Right Asset to Load Matching

One of the most common occurrences of cost escalation is the Asset (Truck / trailer / container) matching to the Load. Most times, the reasons could be mis-understanding the requirements jointly by the Shipper and therein the solutions offered from the Logistics Partner and failure to recommend the right optimized Asset based on Volumetric efficiency to the Shipper or Cargo Owners. Lack of experience at the Shipper’s end in co-ordinating for the right requirement also adds to the inefficiency. In geographies where there are seasonal external climatic factors, nature of the goods, the vehicle suspension as per the load etc are some of the key considerations along with cost optimization that needs factoring in. Often Large Odd dimension Cargo or Contract Logistics requirements need to be handled optimally. Digital Platforms have functionalities and features along with seasoned personnel to recommend this at no extra cost.

4.Democratic and Transparent pricing with more Choices

Most traditional Logistics players are hugely manpower dependant and have the propensity to be influenced, be non-transparent in the transactions or dealings. The market is hugely fragmented and opaque and has high counter party issues. Vintage Logistics players have a good sense of how the plague of corruption plays out on their business. Therefore most have resorted to having manpower picketed at each and every bend in the business resulting in huge administration and overhead costs.

When you contrast this to digital Logistics Platform which has transformation practices with transparency at its core, it has the ability to overcome these issues with neutrality and democratic process.

5.Poor Co-ordination:

This is one of the most often seen reasons even despite ERP frameworks et al all in play. Deviations from production/manufacturing or vessel schedules at port or delay in picking and packing or loading or skew during month-ends, delayed documentation and thereon co-ordination between Ocean liners / freight-forwarders, CHAs and CFSs etc strains the supply-chain and the transportation schedule. This affects the value chain, production plans and also the costs viz; detention charges etc. Having a Digital Freight platform, ensures that there is seamless co-ordination between various stakeholders in the throughput and also mitigate the outages.

6.Intermediary / Broker Network influence:

Due to the highly fragmented and unstructured nature of the Logistics sector this sector has a huge influx of traditional brokers / booking agents intermediating the transactions. As a result there is a huge overlap of opacity in pricing and the overall costs that clients pay for the transactions. Client – Shippers could take support of various Digital Freight platforms to get  transparent and unbiased pricing and a trustworthy partner to facilitate their logistics.

7.Poor Tracking and Visibility

A majority of intermediaries in logistics across modes of transportation do not offer client shippers visibility of their Shipment. Albeit to a large extent the e-commerce / last mile players have ushered in a great amount of work on tracking, however for other verticals in logistics this is still a black box. Primarily it appears that the incumbent stakeholders have not adopted and invested in the new technologies. However associating with Digital Logistics companies gives Shipper clients that edge of GPS and IOT framework that gives visibility of location, temperature tracking for reefer movement and can being on top of their Shipment at all times. Some of the platforms also offer predictive analytics for route optimization and scheduling etc.

8.High Management and administration cost

One of the key overhang of cost to any Logistics operations is the high density of Manpower designated to activities pertaining to the transaction throughput. With digitization, automation, and deep learning technologies available in pervasive enterprise networks that these new digital frameworks offer, client Shippers could immensely benefit with no additional cost. Their existing systems could integrate with APIs and seamless, efficient and optimized costs could be experienced. The normal scenario of seeing huge manpower on the Logistics floor could be optimized using digital platform intervention and Client Shippers could re-designate personnel to more productive activities.

9.Physical documentation

Loading receipts LRs, Bill T’s, D.Os, E-way bill, Invoices, Bill of Lading, Proof of Delivery PODs are some of the commonly heard documentation besides many others. Imagine a scenario where a host of these are automated and available to you omnichannel (Desktop, mobile) on the fly. This would complete bring in efficiency to the organization, save management and administrative costs and bring delight to stakeholders. Well, Digital freight platforms cut across all these documentation pain points and deliver a dashboard experience with complete documentation automation.

ValueShipr (www.valueshipr.com) is a hybrid digital freight platform that is a marketplace network that systematically overcomes most challenges and client Shippers and fleet owners could benefit by integrating or partnering with the platform.

Call us: +91 86550 12255
Email: sales@valueshipr.com