Logistics and trucking in India is undergoing a huge transformation in the face of challenges put forth by the global pandemic and it’s ripple effects. The highly fragmented industry is starting to get organised and consolidated compared to how it was pre-pandemic, and this is seen in truck ownership patterns, adoption of technology, and operations.
Three-fourth of truck ownership in long distance trucking, that drives the economy, is split across a large number of small fleet owners who have less than five trucks. The remaining are operated by organised transport companies by merging their fleet with those from the market.
The sector is under persistent financial and operational pressure due to the market volatility brought about by the pandemic.
Issues plaguing transporters
Majority of Indian transporters operate with thin margins, often erratic payment cycles, and a short supply of qualified and reliable drivers. The pandemic has worsened all of these environmental variables for the industry, and has driven out droves of businesses from the sector.
The economic slowdown in 2019 put a lot of companies under duress, and just as transporters were recovering from that, COVID lockdowns hit the industry.
The lockdowns during the first and second wave pushed a large number of small fleet owners over the edge. The EMI moratorium during the first wave helped some to stay alive longer, but it was a temporary measure that needed a steady period of full volume business to help fleet owners recover. Instead, they were hit with lockdowns from the second wave.
Demand was suppressed in a multitude of industries, and it resulted in a large number of transporters changing track to short distance trips or going out of business altogether. There are no official figures on this impact, but a back-of-envelope calculation indicates that the active long-distance fleet size has shrunk by over one-third since January 2020.
The unpredictability of the market situation and truck availability has forced companies to consolidate their transport pools and increasingly prefer larger players. This acts as a driver for consolidation in the industry and is still ongoing during the current economic cycle.
Current region-wise impact on goods movement
Even with the pandemic being restricted to Kerala and the North-East today, fleet owners and drivers have been hesitating to take up long distance journeys as quick return loads are not often available. The government is forced to keep fuel prices up for the time being to support the world’s largest free vaccination drive and support those most affected by the pandemic in terms of reduced jobs and depressed wages.
Businesses have learnt to continue to operate their plants even in the face of slight flareups in COVID cases, and this has meant that the operations are steadier than during the period between the first and second waves. Localised lockdowns and restrictions have become the norm across the country, and most parts of the country are open and operating at this point.
While this is a positive for manufacturing units, the case for logistics is different. Fleets operate as a network of connected nodes of loading points, and any node going down in a lockdown has a significant impact in truck availability in all its connected nodes. This dynamic combined with the reduced number of those operating long distance trucks disrupts the supply-demand equation. The availability of trucks at any given point in time and location is not predictable yet, and as a result freight rates continue to be high - often 40-50 percent higher than the pre-pandemic levels.
Preventing future disruptions
The first wave lockdowns tested all organizations regarding practicality of their business continuity plans and preparations, and it is fair to say that many came up short. But businesses learn quickly, and 18 months after the first lockdowns, organizations have protocols and SoPs for their manufacturing facilities as well as field and office staff to continue operations in the face of disruptions.
Along with that, companies are adopting digital technologies to be more resilient, and are driving their vendors to do the same as well. Transport companies, which are a fundamentally technology-driven, saw the pandemic forcing their customers and peers to catch up in terms of technology usage--truck sourcing, tracking, digital documentation, and accepting electronic Proof-of-Delivery (ePODs).
The logistics sector has gained resilience through adoption of technology, and while it was struggling in terms of fleet tracking technologies in the past has now found greater adoption. Supply chain visibility has a huge benefit, and organisations are adapting it for better control and business outcomes.
Recovery expectations
While India is vaccinating the equivalent of the entire population of Australia once every three days, it still has quite a way to go to get to herd immunity. And this is forcing organisations to not rest with the current stability and tread cautiously.
India and the world itself are bracing for a third wave of the coronavirus, but the logistics industry is better prepared this time.
The combination of localized lockdown protocols instituted by the government, industry’s improved resilience, and the clear signs of overall economic recovery is helping everyone to look at the future with cautious-optimism that will be supported by resilience-building in the background.
(Anjani Mandal is CEO of Fortigo Logistics)
