How much could the Indian logistics sector save through streamlining processes and switching to green energy?
The answer is Rs 311 lakh crores over the next 30 years, according to a June 2021 report by the National Institution for Transforming India (NITI Aayog).
A major force driving the growth in India’s freight activity is an expected mass movement of about 400 million citizens towards tier-1-2-3 cities, according to the report. The logistics sector, already buckling under the rise in demand, also reels from high pollutant emissions and logistics costs.
While 30 years might seem a long way away, companies in India’s logistics sector have already begun investing in sustainable last-mile transportation as well as technology to future-proof business.
Third-party logistics (3PL/TPL) provider Mahindra Logistics, a part of the larger Mahindra Rise conglomerate, uses a two-pronged approach -- green energy and technology—to solve sustainability pain points in the sector.
The company currently provides end-to-end logistics solutions through its over 3,800 employees in the areas of supply chain management and enterprise mobility solutions.
In January, the Mumbai headquartered firm introduced a fleet of 1,000 electric vehicles in its logistics chain. According to Mahindra Logistics, its electric fleet, called as EDeL (short for electric delivery), has saved over 100 tonnes of CO2 emissions, through covering 1 million kilometers. This is equivalent to planting around 5000 trees, according to an earlier tweet by the company.
“EDeL already operates a large fleet of EVs across Bengaluru, Mumbai, Delhi, Pune, Kolkata, and Hyderabad and plans to cover the top 20 cities by year end,” Shailesh Sultania, Chief Digital Officer, Mahindra Logistics, told TechCircle.
Driving into the cloud
Mahindra Logistics’ digital team consists of over a hundred employees who work on in-house tools and with software vendors to manage the IT infrastructure and management within the company. Its main partner is Oracle, through which the company has implemented the Oracle Transport Management solution and the Oracle Cloud Infrastructure (OCI).
The electric vehicle bet has accelerated technology push at the company. “EDel is one of the revenue generating initiatives which requires a very strong IT platform,” Sultania told TechCircle.
The different components that form the backbone of the electric fleet include battery management, fleet management, route planning, track & trace, and transport planning, which are processes that are technology centric.
In terms of its digital push, Mahindra Logistics has migrated onto the OCI, which, according to Sultania, allows them to interface and connect with systems to help monitoring of message flow. The platform, like most modern cloud services, has been enabled with pre-built application programming Interfaces (APIs) for seamless integration.
Through the cloud integration, the company has been able to realise 70% faster integration, while the cost of integration has been reduced by 50%, while monitoring capabilities have increased threefold, according to Sultania.
For tracking and tracing vehicles, the Oracle Transport Management solution has been implemented, along with its machine learning algorithms which can predict estimated time of arrival (TOA) accurately and provide alerts, among other features.
“We are also investing in employee experience tools including self-service portals, new Human resource management system (HRMS), facial recognition-based attendance,” Sultania said.
The digital team at Mahindra Logistics has deployed hand held terminals for the warehouses, automatic transport planning and robotic sorting solutions as part of touch-free operations.
Tapping into the warehouse boom
A large part of Mahindra Logistics’ services includes warehousing solutions, an area where transactions in India are expected to grow to 76.2 million square feet by 2026. And, this is only for the top eight cities.
London based real estate consultancy firm Knight Frank has pegged the current warehousing capacity in top Indian cities in 2021 at 31.7 million.
The boom is predicted due to greater internet penetration across India, due to which tier 2,3, will notice a rise in grade A compliant multi-storey warehouses.
E-commerce is expected to increase its space in warehouses by 165% while third party logistics will increase in capacity by 56%, according to the report. Mahindra Logistics is eyeing these two areas for growth along traction in consumer and pharma as well as auto and engineering, among other industries.
The company has grown its warehousing footprint to 16 million square feet in the last ten years and plans to add another 10 million by 2024.
“There is an increased adoption of multimodal transportation systems in fulfilment logistics and warehousing services. We have also observed an increase in Omni-channel distribution models especially in e-commerce and consumer segment,” Sultania said.
The numbers story
In terms of numbers, Mahindra Logistics’ warehousing service revenues rose from Rs 351 crores in 2019 to Rs 436 crores in the 2020 fiscal ended March 31, at a growth of 24% year-on-year.
This is during a time where Indian warehousing transactions as a whole fell by 23% in 2020 in the top eight Indian cities, according to the Knight Frank report.
“Share of warehousing and value-added services in the non-Auto and e-commerce period grew significantly and has reached 31.7% in FY20 compared to 25.8% in FY19. We expect to continue this growth trend,” Sultania said.
Moving forward, the digital team’s focus is on new solutions such as return processing, pop-up sort centres and integrated distribution services, according to Sultania.
For its March 2021 quarter, Mahindra Logistics reported a 20% growth in profits at Rs 12 crore, which was driven mainly by e-commerce, freight forwarding, consumer, and automotive sectors.
Its net sales also saw an increase to Rs 974 crores in the quarter, rising from Rs 812 crore in the corresponding quarter last year.
As enterprises transform the face of their supply chain management through AI/ML, IoT and other technologies, companies such as Mahindra Logitics look to ride this upcoming growth wave.
“The logistics industry is ushering in more transparency as suppliers, workers, and communities’ access increasingly refined technologies and use them to share information,” he pointed out.