India's logistics sector is highly defragmented with high logistics costs and poor logistics infrastructure is the primary concern for the logistics sector in India. The logistics cost in India is higher than the other country and is currently 14% of the GDP of our country. Due to this, the movement of goods from source to destination is a major problem in India. Logistics cost includes transportation cost, warehousing space, packaging, security, materials handling, fuel cost, and duties, etc.
According to the update from the Department of Commerce, the Indian Government is planning to reduce the logistics cost from 14% to 10% by 2022. Some of the Government's main initiative to bring down the logistics cost and improve the country's transportation facility are as follows:
Creating road-rail-road network
In India, the Road network carries about 60 percent of the freight cargo but the Indian road network is very complex. So, it requires a combined and coordinated development of railways and roads network to improve the transportation of our country. As transportation through rail network is more energy-efficient than the road network. And hence the movement of goods through the road-cum-rail mode would definitely reduce the logistics cost and improve the transportation service of our country.
Developing Multi-Modal Logistics Parks
MMLP is a Freight-handling facility surrounding a minimum area of 100 acres, with different modes of transport access, providing world-class storage solutions such as cold storage, mechanized warehouses, and handling as well as delivering value-added freight services. This initiative has been taken to improve the logistics sector by reducing freight costs, warehouse costs, and vehicle congestion.
Implementing GST Tax reform
Implementing GST has eliminated the check posts across the nation which leads to a reduction in waiting time and hence turnaround time of trucks improves. GST has replaced all the indirect taxes and has eliminated the need for warehouse hubs across the states which were used to avoid Central Tax. This leads to better utilization and efficiency of vehicles which eventually reduces the logistics cost.
Strategies to reduce cost for your logistics business
Poor logistics management, planning, and decision-making could result in missed delivery deadlines, excessive expenditure, and broken goods. This is why it is important to optimize the operational efficiency of the logistics business and thereby reducing the overall logistics cost. Some of the basic measures to reduce logistics cost are as follows:
Consolidated shipments
Full container loads (FCL) is more preferable to less than a container load (LCL) as it utilizes the complete space of the vehicle and is safer and more cost-effective. But using consolidated shipments has considerably reduced the logistics cost. Consolidated shipments mean combining the several smaller shipments from multiple suppliers which shares the same destination point into one consolidated shipment.
Enabling Technology
Technology plays a vital role in the logistics sector to improve the overall logistics problem through smooth and efficient operation. It is good practice to use a complete logistics management software to reduce overall cost by improving operation flow. The software can help you to detect the fuel wastage in idling, fuel theft detection, vehicle theft, and inappropriate use of your assets. This could be the key factor for owners to reduce their business costs.
Smart Planning
It means proper planning and coordination of all the resources available such as automated routes planning and scheduling, procuring the goods, storage facilities, and timely product delivery to the required location. Timely delivery of products reflects a positive image for the company and reduces the chance of losing clients.
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