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The logistics industry in India has seen significant instability over the last three years and new challenges as the country recover from the epidemic. Stakeholders cite the workforce as one of the major ones now.

According to the co-founder of a logistics firm, the industry is facing driver shortages for deliveries. During the festive season, when the traffic load was high, it caused many more problems. A courier aggregation service claims that logistics companies struggled to reach the expected delivery time, which resulted in dissatisfied consumers.

A co-founder of a logistics firm claims that the industry is the most disorganized and fragmented in the country. It needs to be streamlined to increase the effectiveness and efficiency of the operations.

According to a logistics provider, there is an increase in the demand for shipments. However, this industry has several issues with employment opportunities and driver retention. Truck drivers, forklift operators, skilled workers for warehouses, and other positions are critically needed in the country’s logistics industry to keep up with the demands of a growing economy.

With the budget coming soon, the stakeholders claim the government has an opportunity to address these and other problems affecting the logistics industry, which is the foundation of trade and commerce.

Additionally, some experts compare the recent claims of unemployment with the need for better workforce management in logistics. There is an opportunity for gainful employment here, and the budget may outline the several routes necessary to hire, train, and retain staff to benefit the industry in the long run. However, the challenges are making jobs in the logistics sector attractive and encouraging individuals to consider it a career option.

According to a logistics provider, rising fuel prices are another challenge hurting the logistics sector. The road is India’s most common mode of transportation, mainly because overcrowded rail networks, multiple handling, and high rail tariffs make it difficult to use those services.

However, due to recent volatility in fuel prices, transportation costs have significantly increased, putting logistics firms under a lot of pressure. He also brings attention to the inadequate conditions and restricted locations of warehouses.

According to him, building a sizeable integrated warehousing space is challenging because of the need for a qualified workforce, high warehouse rent, and higher interest rates. He also notes that there is a need to streamline the processes at various stages in the industry.

According to experts, India’s logistics costs as a percent of GDP are high, and lowering them can significantly boost the sector’s operations, employment, and growth.
According to the government, by 2024, the logistics cost percent to GDP, which represents the cost of transporting goods, should decrease from around 16% to around 10%, making it more competitive with developed or similar countries.

The logistic provider is cited that in the upcoming budget, the government may address crucial concerns, including rising rental rates, fuel, and transportation expenses, fragmented communication, and infrastructure expenditures which have significantly increased the logistics service’s operational costs.

There should be an incentive-based structure in place. For instance, people who construct warehouses can get rewarded, and the tenant should be able to rent the space for considerably less per square foot. The government should consider giving incentives to businesses that invest in automation and warehouses that use such technology.

Any sector stakeholder is aware of the need to use more technology. It equips most companies to compete with any major player on the global stage. However, the high fees are only affordable for some companies.

According to the logistics provider, the budget might boost logistics automation costs, encouraging even smaller firms to adopt new technology. Focused investing in advanced technology is urgently required, according to a logistics company expert.

We can foresee that the budget for 2023 will strongly emphasize improving India’s logistics ecosystem by utilizing data-driven technologies to make it even more technologically advanced, integrated, affordable, and reliable. As there is a severe shortage of skilled workers and professionals in this industry, the logistic company expert also emphasizes improving human resource skill sets.

We need to support R&D and innovation by establishing training institutions that can teach students about advanced technology. The sector also has to encourage equal employment opportunities for women and people of the third gender, cited the logistics company expert.

A logistics provider suggests that the budget should consider investing in more multi-modal logistics parks. She adds that we anticipate an investment in port infrastructure this year to address logistical inefficiencies and that the industry’s efficiency will be the main focus.

Industry leaders eagerly await the National Logistics Policy’s implementation to streamline operations and lower logistics costs.

Demand growth has revealed weaknesses in China’s logistics infrastructure. Still, the country hopes its new “five-year plan” will be sufficient to stop the impending departure of western multinational corporations.

The first long-term plan for modernizing China’s logistics system was unveiled last month by the General Office of the State Council, with an emphasis on enhancing efficiency, resilience, and safety.

Although it is a five-year plan, according to a state news agency, by 2025, a modern logistics system featuring supply/demand adaptation with internal and external connectivity will be in place.

It will be safe, efficient, smart, and green, extending the value chain of logistics services, strengthening the service guarantee of modern logistics to people’s livelihood, and improving current logistics emergency response capacity.

According to an advisor of global logistics, China needed this investment to remain competitive.

China’s transportation and logistics infrastructure has failed to keep up with peak demand in recent years, and “significant” investment will be needed to expand capacity at ports, airports, in the road and rail system.

According to a global logistics advisor, there would need to be an emphasis on lowering logistics costs as a proportion of GDP, which would need business reform, a reduction in tax and other levies, and reducing congestion.

As a result of manufacturers relocating to other countries, logistics managers told reporters that cargo orders from China to the US dropped by as much as 50% in November.

Chinese authorities will need to put in a lot of effort to maintain their position as the preferred off-shoring market, as Western corporations are under pressure to consider alternate Asian production locations.

Improving “green” logistics credentials and supply chain efficiency through digitalization will be essential to meeting the demands of multinational organizations.

The cost of being overly reliant on one country to supply the world and the necessity to expand logistical footprints were made clear by pandemic-induced shortages of completed goods and essential components for manufacture.

According to a Freight and Trade Alliance Head, global supply chains have not learned the value of not putting “all your eggs in one basket.”

An advisor of global logistics cited many companies in 2020 successfully looked for new supply sources and markets for finished goods. However, with China’s opening, their demand for resources and the supply of completed goods will rise.

However, with China’s opening, their need for materials and supply of finished goods will increase. We are now hearing that many companies will resume trading with China and that we have yet to learn the dangers of placing all your eggs in one basket.

Hear predictions for 2023 from top venture capitalists with a focus on investing supply chain:

There has been a major surplus of inventory over the past two years due to supply chain disruptions, inventory management challenges, a slowing economy, and shifting consumer buying patterns. There is an expectation that B2C retail platforms that use this extra inventory or B2B platforms that make it possible to offload excess inventory will rise in 2023.

Global supply networks will continue to be reconfigured, reshored, and automated due to conflict, illness, and politics. As Big Tech losses data scientists, software engineers, and automation engineers, more high-quality tech talent will become available for supply chain reconfiguration. Industry associations will encourage companies to take ESG/carbon accounting seriously by creating standards for certain supply chains.

End-to-end visibility is still an illusion for most supply chains, though, as there are still many gaps in the data. The ongoing migrant crisis is putting pressure on the global relief supply systems and causing hardship among people. In a recessionary economy, other priorities rise to the top of the C-top Suite’s ten lists, moving supply chain investments down.

Supply chain optimization will be the top priority for brands and retailers in 2023. Retailers will probably turn to post-delivery, returns, and disposition as a strategy to protect margin as the market resets with a focus on fundamentals rather than the emphasis on top-line growth in inefficient channels over the last few years.

An efficient disposition plan will be essential for retailers looking to maintain their margins in 2023, given the persistence of surplus inventory and high return rates.

The consumer is dissatisfied with wastefulness everywhere in commerce, and we are post-COVID exuberance, coping with inflation and recession, and seeing our earth in distress.

1. Excess inventory will be much more qualified for resale/use and find new homes more efficiently and at a lower cost through new platforms and marketplaces. The status of “first owner” of many goods becomes a luxury.
2. The delivery promise changes from fast, today and tomorrow, and free to trust when it will arrive, on a specific date. For most non-consumable SKUs, speed next-day delivery becomes a premium, paid option.
3. Consumers will invest in brands emphasizing ESG — core to consumer trust. ESG shifts from strategies to quantifiable/measurable impacts that consumers can understand. At some point, consumers will expect all SKUs and services to disclose their “cost to the planet.”

Two supply chain trends to pay attention to as we approach 2023 are:

1. Sustainability- The need for more precise carbon tracking for supply chains, utilizing accurate data from the production process rather than estimations, will increase in 2023. The circular commerce industry is also expanding quickly, with businesses concentrating on the sustainable management of unsold inventories, returned goods, and post-consumer recycling and resale.
2. Resilience- After the difficulties posed by COVID lockdowns, brands are currently restructuring their supply networks to increase their resilience. To lower risk, brands will concentrate on addressing resilience in second and third-tier suppliers rather than only direct suppliers.

It is certain that in 2023, more capital will be invested in supply chain technology following significant macro-social and geopolitical changes that have made the supply chain to a level that has never been achieved. Along with that, you may anticipate this to be an exciting area to observe because crisis vintages provide some of the highest private market returns.

2022 was a challenging year, and the fight is still ongoing. The reliability of the supply chain will face new challenges in 2023.

While many people might predict a decline in supply chain challenges, a more informed view is that the obstacles remain in a different form.

Here, we outline what to anticipate when growth slows in the face of the impending recession. The supply chain’s transition from 7-8% growth to a slower pace has its issues.

Covid and China

Companies reliant on Chinese manufacturers must prepare for severe supply disruptions and shortages. The effects of COVID will be far more severe than anticipated, peaking two to three weeks after Lunar New Year. The problem is that, although unknown, COVID levels are high, and the lunar New Year celebration will expedite the spread. Demand in China will decline as a result of death and disruption. Understanding how dependent your company is on China will help you take the next move and minimize risk.

Organizational Realignment and Adjustment 

Expect businesses to prepare write-down stories for Q1 reporting that include inventory write-offs and employee layoffs in response to the slowing of growth. Consider managing your inventory seriously. The write-downs are a fantastic source of information about the organization’s failure to match supply and demand and redefine inventory management processes by learning lessons from the past.

Shifts in Demand 

This crisis will severely impact the wealthy consumer more than in the past. To identify the trends and align the supply chain based on actual expenditure, use market data and model supply chain flow based on consumption. Avoid using conventional demand modelling practices that rely on previous shipments and orders.

Supply Shortages

As the Russian-Ukrainian conflict intensifies, a different type of discussion is driven by energy and petroleum-based industries. Manufacturing reliability is impacted by the rising cost of energy in Europe and impending power disruptions. Connecting to your suppliers through a strong supplier development organization is advisable.

Delays in Container Bookings

Forecasts indicate that 25–30% of containers will be delayed or rebooked on future ships due to the decline in demand; thus, expect a wide range of lead times. Create a master data layer for planning to inform the company regarding expected deliveries based on actual bookings. We will experience a change in lead times and be prepared for irregular and variable behaviour.

According to a global property consultant firm, rent in logistics warehouses throughout Asia-Pacific is anticipated to moderate in 2023 as supply chains start to normalize and demand remains to soften.

The independent global property consultancy firm observed that of the 17 cities it studied, the rental forecast would remain unchanged in five (Beijing, Shanghai, Greater Kuala Lumpur, Manila, and Jakarta).

The property consultancy firm monitors the other 12 cities: Auckland, Brisbane, Sydney, Melbourne, Hong Kong SAR, Bengaluru, Mumbai, Delhi NCR, Singapore, Taipei, Ho Chi Minh City, and Bangkok. These cities are all predicted to see an increase in rental rates.

According to the property consultancy firm, the Asia Pacific logistics market would be generally balanced in 2023, with rental growth expected to moderate compared to the previous two years.

It added that Ho Chi Minh City would have the lowest vacancy rate (1%), Australia is anticipated to have the highest rent rise (12.0%), and India is anticipated to have the largest supply growth (2.8 sqm).

With little more than 8 million sqm of incoming supply and “weakening expansionary demand,” the independent global property consultancy firm noted that vacancies in the region would probably grow significantly.

However, it added that pipeline supply constraints in markets like Sydney, Hong Kong, and Ho Chi Minh City might reduce the decline in vacancies.

On the other hand, the global property consultancy firm cites that recent shipping patterns signal that supply chains are beginning to normalize, reducing some pressure on demand and rent.

But the property consultancy firm added that higher borrowing costs coupled with imminent recession fears due to the aggressive interest hikes could result in a more cost-conscious business environment. Occupiers who adopt the ‘just-in-case’ approach may review their portfolio to consolidate the space they require to minimize capital expenditures as consumers scale back on their purchases and consume more services instead of goods.

Given the ongoing supply-chain challenges and decoupling from the Chinese Mainland, the report stated that businesses in the Asia-Pacific region are also evaluating their needs for logistical spaces and adjusting plans to focus on nearshoring.

The property consultancy firm added that much of the recovery in this sector depends on the Chinese Mainland’s capability to reign as a trade powerhouse and maintain continuous activity in its factories and ports on top of stringent COVID policies.

Businesses continue to rely on the “China Plus One” strategy and diversify production into other markets to avoid further difficulties in supply chains.

In addition to strict COVID laws, the capability of the Chinese Mainland to dominate as a global trade powerhouse and maintain continuous activity in its factories and ports is crucial for this sector’s recovery.

However, the property consultant business highlighted that e-commerce and life science are driving the need in the region; thus, there is still confidence in the APAC logistics sector.

According to the property consultancy firm, as the foundations for the logistics sector in Asia-Pacific are less well-established than in the US or Europe, this has resulted in a severe lack of modern facilities and intense competition.

The global property consultancy firm also identified life science as an emerging bright spot for the region.

Due to post-pandemic behavioral changes, healthcare investment has increased, creating an enormous untapped potential for Asia-emerging Pacific’s life science industry. The property consultancy firm added that every sector of this industry demands more space, including production facilities, research and development (R&D), and logistics for pharmaceuticals.

The property consultancy firm stated that despite the general slowdown in demand, the future for the region’s e-commerce sector is still promising. Although e-commerce demand is returning to normal, the outlook for the Asian-Pacific logistics markets is still positive due to continuous lease demand that will support occupancy levels and moderate rent rise.

A more modest rental increase is viewed since it is more consistent with fundamentals in the post-COVID environment, according to the global property consultancy firm.

It was anticipated that dynamics to remain attractive, as demand will continue to be strong in the manufacturing hubs, supported by ‘China Plus One’ plans and the ongoing structural shortage of prime logistic assets in the area.

The global property consultancy firm further stated that while just-in-case plans could wind down as supply chain disruptions subside, the development of resilience and diversification in supply networks is also unlikely to completely reverse.

The Vietnamese government supports the simultaneous implementation of important initiatives and solutions to increase the nation’s logistics sector’s competitiveness.

Developing logistics into a service industry with high-added value

The government will direct Ministers, heads of ministerial-level agencies, governmental agencies, and Chairmen of People’s Committees of provinces and centrally-run cities to focus on the synchronous implementation of solutions to increase competitiveness and expand Vietnam’s logistics services.

The government’s goal is to make the logistics services sector a high-added value, linking them with the development of manufacturing, domestic and international trade, transportation infrastructure, and information technology.

The government intends to develop the logistics service market to increase the competitiveness of logistics service enterprises.

It would concentrate on using Vietnam’s geographic advantages, enhancing connectivity, and improving logistics in association with sustainable supply chains to transform Vietnam into a major regional logistics hub. Additionally, emphasis will be placed on promoting digital transformation and technology applications and raising the quality of human resources.

Accordingly, ministers, heads of ministerial-level agencies, Governmental agencies, and Chairpersons of People’s Committees of provinces and centrally-run cities are required to focus resources on and urgently implement the tasks assigned in Decision No. 221/ QD-TTg.

The Ministries of Industry and Trade, Transport, Finance, and associated organizations should closely monitor the global and regional situation and promptly ascertain the effects on the nation’s economy. 

Development of green logistics

In order to ensure the synchronization of transportation infrastructure and logistics development goals, including logistics centers, inland depots, and bonded warehouses, the Ministry of Transport will be in charge of and coordinate with other ministries, branches, and localities in implementing transportation components in national and regional master plans and provincial plans.

The resolution also aims to promote connectivity between various modes of transportation and maximize cross-border and multimodal transport, decrease costs, and improve the standard of transportation services. 

Goods trading floor will be developed in conjunction with e-commerce for the development of green logistics.

Logistic Services Facilitation

The Ministry of Finance is expected to keep reviewing and removing barriers related to tax laws, taxes, and service charges, to facilitate the provision of logistical services.

The ministry’s responsibilities include working with other ministries and branches to promote trade facilitation initiatives, restructure customs processes, shorten and streamline specialized inspection processes, standardize dossiers, and carry out WTO Trade Facilitation Agreement commitments.