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E-Commerce and Logistics Revolution(GS 3,Economy,UPSC IAS mains)

What is the issue?
  • The e-commerce firms are driving many technological changes.
  • The Centre must create an enabling logistics environment to benefit from them.
What are the emerging developments?
  • The global logistics sector is undergoing a quiet revolution.
  • The key benefits are reduced costs, quick arrivals and complete tracking of goods.
  • The new technologies like the Internet of Things (IoT) and people’s changing preferences in buying goods online are driving this.
Why is the logistics sector significant?
  • Logistics cost includes all expenses in taking a product from factory to consumer.
  • These include direct costs like transport cost or indirect costs like charges of freight forwarders, etc.
  • Logistics cost is significant, and add on an average of 30 to 40% to the cost of the goods.
  • Thus, while world trade is about $17 trillion, the global logistics sector has a turnover of $5 trillion.
  • The logistics revolution will transform India’s ocean shipping and trucking sectors.
What are the limitations at present?
  • The logistics sector currently is less automated.
  • Firms move light packets through the courier firms that do end-to-end job.
  • It takes within 1 to 3 days generally, but the costs are high.
  • Firms thus choose to ship large or less urgent consignments by sea.
  • It is cheap compared to the courier, but delivery takes more time.
  • This is because of complex shipping, and customs procedures.
  • It is also because over 70% of the logistics sector is in small, unorganised hands.
  • However, this model is set to change.
  • Many large firms are now entering the cargo business to offer worldwide door-to-door delivery.
How is e-commerce a driving factor?
  • The major push for logistics transformation comes from the online e-commerce firms like Alibaba and Amazon.
  • So far these firms have been focussing on flying light packets.
  • But people now prefer buying even bulky goods like foodgrains or steel online.
  • The e-commerce firms have to use the ocean route to keep cost under control.
  • But current long delivery times of sea transport do not help the fast-paced e-commerce delivery model.
  • So, these firms plan to develop end-to-end supply chain for sea-based shipments also.
How does technology help?
  • A range of technologies is making ship or truck journey more secure and efficient.
  • This applies to a combination of the IOT, Block Chain, and Artificial Intelligence (AI).
  • IOT - IOT sensors provide a unique internet address to each device they are attached to.
  • They feed the location information into the global database.
  • Data collated from the devices generate real-time weather and traffic advisory using AI tools.
  • Sensors - Internet-connected sensors are placed on the individual packets/consignments.
  • They make tracking possible across the supply chain.
  • It also ensures against pilferage and contamination.
  • Satellite trackers do this even when there is no mobile coverage.
  • Blockchain technology - Data from the sensors can be uploaded on the blockchains.  
  • This allows everyone in the supply chain to view the condition of a packet during the journey.
  • Apps - Return of empty ships and trucks after delivery of goods increases the cost by about 30%.
  • Simple mobile apps now facilitate customers and owners to strike a quick deal to ensure near-total use of space.
What lies ahead for India?
  • Technology - The variation in time for an export container moving from a factory to port ranges between 40-70 hours.
  • The uncertain delivery time increases inventory and freight costs.
  • India’s logistics costs are 40% higher than in most developed countries.
  • Incentivising the use of new tools will provide more certainty in cost and time of delivery.
  • Skilling - The logistics revolution will lead to business consolidation leading to tough times for small players.
  • About 7.5 million jobs are estimated to disappear in the US alone in the next 10 years.
  • The situation in India will be no different, with e-commerce and logistics related changes.
  • Logistics service providers/ small trucking and shipping firms must look to upgrade their skill.
  • Changes in the logistics sector will deeply integrate India with global supply chains.

Source: XM

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