Why Indian Logistics Is Finally Ready For Its Defining Decade & What Business Leaders Must Do To Capture It – Prem Gupta

For a long time, logistics in India was regarded largely as a support function, to be considered after decisions relating to manufacturing, sales and procurement had already been taken. It was treated mainly as a cost to be negotiated rather than as an important part of business planning. That approach may have been adequate when supply chains were simpler, but it will not be sufficient for the decade ahead. India is entering a period in which logistics directly influences industrial competitiveness, export growth and regional development. Manufacturing is expanding, trade access is widening, and infrastructure is rapidly improving. Together, these developments give India an opportunity to build a logistics system worthy of its industrial ambitions.

Companies that will view logistics as a long-term strategic capability, build capacity before demand becomes fully visible, combine rail and road intelligently and maintain a strong focus on service quality will benefit most. A terminal, rail network or warehouses cannot be created after the market has become congested. Suitable land, approvals, connectivity, capital, teams and systems must all be put in place through patient and disciplined investment.

One of the most important changes underway is the movement from excessive dependence on road transportation towards a balanced multimodal system. Roads will remain essential because they provide flexibility and the first- and last-mile connectivity. However, for large manufacturing industries moving substantial volumes over long distances, road transport alone is neither efficient nor the most sustainable solution. Rail is much better suited for regular, high-volume movement because it allows large shipment sizes to be consolidated, reduces the number of vehicles required, and offers much greater efficiency over long distances. Further, as the railway network becomes increasingly electrified, rail freight is less directly exposed to diesel price volatility and offers an important environmental advantage.

The correct approach is not to treat road and rail as competing alternatives. Road is best suited for distribution over shorter distances, while rail is more efficient for the long haul. The responsibility of a logistics operator is to combine both into one coordinated service so that the customer does not have to manage several disconnected providers. The dedicated freight corridors are important in this regard. With both the Western & Eastern Dedicated Freight Corridor fully operational, freight trains now have access to infrastructure designed specifically for cargo movement. The Western corridor is especially important for container traffic because it links major industrial regions with ports serving international trade. Longer and heavier trains, including double-stack container trains on suitable sections, improve the economics of rail-based container transportation.

The announcement of further freight corridors, including the proposed East-West corridor between Dankuni and Surat, is therefore encouraging. Major infrastructure takes time to build, and at Gateway Distriparks, our experience has been that capacity must often be created before demand becomes obvious. Such investments may appear premature initially, but logistics infrastructure must be assessed over a much longer period. When a manufacturing cluster expands, or an industrial corridor begins to generate traffic, the operator who already has a functioning network can support customers immediately.

A manufacturer is more likely to establish or expand a plant where containers, rail services, customs facilities, warehousing and road connectivity are already available. Logistics infrastructure does not merely respond to industrial growth; in fact, it often helps make that growth possible. This is why being asset-heavy, when supported by prudent financial planning, can be a source of strength in logistics. Strategic ownership of terminals, equipment, rail-linked facilities and operating infrastructure provides greater control over capacity, service quality and future expansion. Ownership must be accompanied by disciplined capital allocation, realistic assumptions and a clear understanding of the cargo base each asset will serve.

However, an asset-heavy model should not be confused with indiscriminate expansion. Capital must be deployed carefully, borrowing must remain within prudent limits and each investment must be evaluated over a sufficiently long period. Logistics assets frequently take time to reach their full potential, particularly when they are developed in emerging industrial regions. A sound balance sheet gives a company the ability to continue investing during periods of uncertainty and to maintain service standards even when market conditions are difficult. Financial prudence and long-term investment are therefore not opposing ideas.

Another major development is India’s growing integration with international markets, with several trade agreements being negotiated and closed. However, tariff benefits alone will not ensure export growth – an exporter must still move goods to the port, arrange equipment, complete documentation, meet shipping schedules and provide reliable delivery commitments up to the mark of global standards. Containerised transportation and inland logistics facilities will therefore play a central role in converting trade agreements into actual export volumes. A well-located inland container depot can bring port-related services closer to manufacturing centres, allowing cargo aggregation, storage, container handling, customs clearance, and rail transportation to be organised inland. A company should not be disadvantaged merely because its factory is several hundred kilometres from a seaport. Inland terminals and scheduled rail services can connect such manufacturers to global shipping routes.

Technology has also become very important, but it must serve practical objectives. Customers expect accurate information on cargo movement, documentation, transit times, and delivery status, together with timely action when difficulties arise. Technology should help operating teams increase efficiencies and reduce costs while supporting customer service. Digital systems can improve speed and accuracy, but responsibility and judgement must remain with experienced teams.

As logistics networks expand, the quality of professional talent becomes increasingly important. Companies need experienced people who understand operations, customers and technology. This is a business in which delays, congestion and unexpected customer requirements can arise without notice, making timely and well-considered decisions essential. Organisations that invest in capable teams, encourage responsibility and create clear systems of accountability & authority are better equipped to maintain service standards as they grow. Strong leadership, supported by experienced professionals throughout the organisation, allows strategic direction and operating discipline to work together.

In the coming decade, manufacturing leaders will need to give logistics greater attention at the board and senior management level. Decisions regarding plant location, export expansion, working capital, sustainability and customer commitments are closely connected with the design of the supply chain. Companies should secure capacity before the market becomes tight, build sufficient headroom, develop alternative routes and work with partners who have the financial strength and operating capability to support future growth. Resilience must also receive attention because ports, shipping routes, equipment and transport networks can face disruption. Service quality must be measured as seriously as freight cost. Transit time matters, but reliability often matters more, because a manufacturer can plan around a movement that consistently takes four days far more easily than one that varies widely from week to week.

Service quality should be judged alongside freight cost, because the lowest quoted rate can become the most expensive choice when failure occurs. This is especially true for export and import cargo, where disruption in a global supply chain can lead to stockouts, missed production schedules, penalties and failure to fulfil commitments to customers. The same principle applies with even greater force in temperature-controlled logistics, where poor handling can destroy the value of an entire consignment. The food and pharmaceutical industries are gradually moving towards higher quality infrastructure, such as the systems developed at Snowman Logistics, as they recognise these risks more clearly. This reflects the direction in which every mature business eventually moves: towards services that may cost more initially but reduce the total cost and risk over time.

India’s logistics decade will not be created by one company, one corridor or one policy. It will be built through the combined efforts of logistics operators, railways, ports, infrastructure developers, and manufacturers. The foundation is now considerably stronger than it was in the past. Freight corridors are operational, further corridors are being planned, trade access is expanding and customers are demanding better service and transparency. India has the scale, entrepreneurial ability and policy momentum to build a world-class logistics network. Those that invest with foresight, maintain financial discipline, build the right assets, appoint capable professionals and place the customer at the centre of their operations will be best positioned to grow. They will also perform a wider national role by helping industrial development reach regions where efficient logistics infrastructure has not previously been available.

The above information is the author's own; Outlook India is not involved in the creation of this article.