India is a developing country with a vast population. Today, an increasing number of people are opting for online shopping, which makes it imperative for the logistics companies in India to cater to the needs of various customers. According to a survey, India is considered one of the most challenging markets to survive in. The logistics companies are experiencing some difficult times due to various reasons, including but not limited to increased demand for better customer service, a growing number of eCommerce websites, and high operating costs. In this blog, we have listed some of the significant logistics challenges that logistics companies in India face and need to tackle as quickly as possible. So, let’s dive in.
The Top Logistics Challenges Faced by Companies Today
High Order Intensity Ratio
Logistics companies are faced with the challenge of maintaining a high order-to-inventory ratio, which is needed to ensure responsiveness. However, this led to them ordering more than required, at least in terms of the time required for delivery. It would lead to higher inventory carrying costs and additional capital costs needed to purchase the stocks.
For example, if a company places an order for 2 days delivery period, which was required for 1 day, then there would be a need to have at least 4 times the inventory as per the requirement of carrying cost. In this case, it requires 4 times as much as money and storage space because only 1/4th of the goods are in use at any point in time. Similarly, if they place an order for 3 days which was required for 2 days, then it would need at least 9 times as much inventory and so on.
Therefore, it is critical to have a strategy to maintain the required stock while limiting the excess supply. The companies need innovative solutions that can help them optimize their inventories and achieve the utmost value.
Lack Of Skilled & Specialist Personnel
The logistics industry is facing a significant challenge in recruiting a skilled workforce. It has emerged as one of the most prominent concerns, especially in the face of increasing volumes, complex operations, and increasing work pressure with multi-tasking. Availability of experienced human resources for mostly labor-intensive processes, demanding higher skills and expertise is a challenge for logistics companies.
For example, if a company needs 100 men in their warehouses to fulfill the service level agreement (SLA) with customers, but only 75 people are available, it becomes difficult for them to meet the SLA.
Therefore, investing time and resources to find a qualified workforce is a significant concern. The logistics industry requires hard-working, dedicated employees who can bring value by providing quality service.
The logistics industry faces a significant challenge in meeting customers’ expectations because customers, especially retailers, often expect to receive their orders faster than possible. It may not be feasible for logistics companies as they need to establish their processes, including planning, procurement, and other logistics operational issues that delay delivery.
For example, a retail company places an order with a logistics service provider, which they receive after 5 days. The retailer expects the goods to be delivered within 2 days because that is what their competitor delivers. The customer’s mindset does not limit the maximum time taken for delivery unless there are severe consequences attached.
Shortage of Drivers & Delivery Staff
In India, a high attrition rate has been reported in the transport department, and it records an average of approximately 30% per year. It reflects on customer satisfaction levels as it leads to slow order deliveries and missed SLAs. Ideally, the transport department should have many drivers and delivery staff to ensure fast order deliveries without any delays.
For example, if a company needs 100 drivers in their transport department, but only 60 people are available, it becomes challenging to meet the SLA because they can be short by almost 40% of what is required.
Therefore, investing time and resources to find suitable staffing is one of the significant logistics challenges today. It needs drivers and delivery staff with the necessary skills that can bring value by providing quality service.
Warehousing & Taxation Discrepancies
Logistics companies generally opt for warehousing because it enables them to store goods and move them closer to the customer when demand occurs. It helps to reduce the transit time. However, warehousing is not free of cost and needs proper planning for optimum use.
For example, if a company places an order with 3 days lead time but does not want it stored for more than 2 days, they will need to rent an extra storage area for 1 day because no warehouses offer a service of 0 days.
Competition with Global Giants
Logistics companies in India face a significant challenge concerning competition from large-sized international companies catering to the global market for years and have vast experience, knowledge, and expertise of the markets across the world.
For example, companies like FedEx or DHL have been operating in India for over 10 years. In contrast, domestic logistics companies are relatively new to the market and need time to realize their mistakes, improve service levels and establish themselves as reliable players.
Slow Transition Into Newer Technologies
Technology has made it possible for companies to provide better service levels. But logistics companies in India are slow to adopt the best available technologies. They need to establish their processes first and ensure that it is effective before encouraging employees to use new technology.
For example, retailers expect warehouses or delivery staff to track orders regularly; however, most logistics companies lack the necessary systems required for real-time tracking.
There are many challenges that logistics companies in India face. Still, if they focus on establishing high service levels and effective processes for better customer support, these challenges will not affect their business in the long run. It is also vital for logistics companies to explore ways to improve overall productivity and speed up deliveries without issues.