July 17, 2019

Transformation of the logistics space with the birth of new-age supply chain startups

We constantly keep hearing how the multitude of changes in the supply chain space has led to the coming in of more organized players as well as startups with new business models, resulting in large scale transformation on the service provider- and corporate-side.

Ashutosh Mayank, VP at Lumis Partners interviewed one of the SCL mentors, Neeraj Bansal, to get his perspective on the logistics space and how and why it has transformed the way it has in the past 5 years. Neeraj Bansal is a digital transformation leader with over 20 years of experience in helping leading organizations take the digital transformation path.

Here are the key takeaways from the interview.

On-ground changes that have happened in the last 5 years in the supply chain space

The biggest challenges in the supply chain industry in the past decades have been reliability, speed and efficiency of the service. With the accelerated growth of e-commerce, food delivery, cab services and other service providers who are giving same-day and next-day delivery, clear benchmarks have been set. This has ushered in a behavioural shift in how customers expect goods across industries to be delivered which, in turn, has put indirect pressure on all brands to fulfil the service at the same speed even if they are not an e-commerce or grocery delivery chain.

“The result, as I see it, is that there is no more a difference between logistics and customer experiences. In fact, logistics defines what the customer experience is going to be. With this awakening happening in more companies, we will see bigger and much faster transformations happening in them. The companies that are laggards in this regard will either be forgotten or will be relegated to the last or least preferred positions.”

The second fundamental change is the bringing in of technology into the supply chain space. According to Neeraj, supply chain is one of the most underinvested industries in terms of technology.

“The initial pull and benchmarks are set by the large organized players who were the first to adopt technology to deliver efficiently. The tough competition from these larger players to the regional and/or smaller players have, in turn, forced them to look for technological solutions to survive and stay relevant.”

In cases where they could not build solutions themselves owing to a lack of expertise or resources, they started looking towards third parties such as software solution providers.

There are also regulatory changes; the major ones being GST implementation and e-way billing. Earlier, there was scope to play around depending upon the tax structures in different states. For instance, the mobile phone industry set up warehouses in places where the taxes were lowest. With the differential tax structures gone, now these players are looking at rationalizing their warehouses, infrastructure, etc. Building a GST infrastructure has taken time, but it is definitely beneficial, and its full impact will be seen in the next 3-5 years.

Changes in corporate engagement with supply chain startups

“According to me, startups are agile, fast, nimble, driven to do more and technology driven. Today, larger organizations find it indispensable to absorb these attributes too and this has resulted in a growing understanding and appreciation of the great ideas and technological innovations startups bring and that it is good to engage with these startups and absorb their innovations to stay ahead of the game.”

Another issue is that large organizations which have been running traditional businesses do not have the capability to build anything on the tech front.

“With logistics now getting disrupted, the only way for such organizations to hold their ground and make their offerings competitive is to partner with these small startups and provide them with the necessary backup. So, it is a need-based association as well. It is a very positive change happening in the kind of corporate engagement with startups.”

Increasing willingness amongst large corporates to look at innovations on the ground rather than looking at their own requirements

The traditional industry that used to work with single ERPs where large consulting firms worked on multi-year projects and integration teams built on top of these platforms in a never-ending process is becoming obsolete now. The fundamental change is that everything is moving to the cloud now, where it is easy to manage, share, etc. and on which large infrastructure investments are not needed. With the shift to the cloud, it is easy for multiple partners and niche players to come in and collaborate to build/ operate your solution.

Even though large organizations are good when you are looking at enterprise-scale systems, there hasn’t been much innovation happening in these large organizations in the logistics space. On the other hand,

“a lot of these startups have taken the solution-oriented approach rather than a platform-driven approach. They leverage analytics, IoT, AI, ML, etc. which are not the forte of traditional companies. With most companies looking for solutions rather than wanting to integrate with legacy systems through platforms, startups have naturally become the go-to option for corporates rather than the large service providers and ERP companies.”

New happenings in the trucking space

The transportation industry is so big in India that whatever effort is being taken is still a drop in the ocean. Currently, there are large organized players entering the market trying to use technology to streamline their operations and the efficiency, speed, etc. of the services delivered necessitated by the needs of the business – the customers who want to deliver at the same speed to their end-customers.

The whole value chain is seeing innovations at the moment, but these are happening in buckets with some focusing on the first mile, some on the last-mile, some on warehousing and so on. There are only a few players trying to innovate the whole value chain.

From the brand perspective, they do not see the first mile, last mile, warehousing, etc. as different things. They want one integrated solution where the logistics between the pickup from the brand to the delivery to the end-customer should be “predictably boring”.

“It should be as simple as water coming out of the tap instantly when you turn it on. You do not consider the supply chain, the source or the internal plumbing while turning the tap; it is so predictable. Logistics too must come to that stage that you are able to integrate everything on the back end so that it becomes predictably boring and easy for the end customer. That is when we would have solved the logistics problem!”


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