Logistics sector spends less than 1 percent on IT

By SiliconIndia   |   Monday, 28 December 2009, 10:00 Hrs   |    34 Comments
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Bangalore: Unlike other sectors, Indian logistics industry spends less than one percent on information technology (IT). According to the study done by Kale Consultants, Indian logistics industry accounts for merely two percent of the $5,000 billion global logistics industry.

"The logistics industry currently spends a meagre 0.5 to 0.17 percent of its overall revenue on IT. The major industry segments that use IT in their logistics spends include airports, ports, warehouses, inland container depots (ICDs) and freight forwarders," says the study. In the last few years, Indian logistics industry witnessed the growth in its demand and global players like DHL, AFL Logistics, CEVA and Expeditors showed the interest to set up shop here. These companies will help in enhancing process and technology solutions in addition to their global footprint and customer base.

The Indian market is estimated at $90 billion and projected to burgeon to $385 billion by 2015. While the global market is growing at the rate of 10 percent, the 3PL (third-party logistics) market, which accounts for six percent of the total market, is expected to grow at 16 percent and command 13 percent of the total logistics market by 2012.

This industry consists of both asset-based and non-asset based logistics service providers, ranging from freight forwarders to 4PL players. Currently, the total size of the domestic logistics industry is about 2.44 lakh crore, with the transportation sector, including road, rail and sea freight, contributing 2,19,655 crore.

In this study, about 166 non-asset based players such as freight forwarders and customhouse agents, and 69 asset-based players such as container freight stations, ICDs and warehouse operators were surveyed. In an interview to Business Line, Vipul Jain, CEO and Managing Director of Kale Consultants said, "Understandably, asset-based logistics service providers in the sample averaged higher revenue than the non-asset based players. The survey covered the full range of logistics companies, from mega-size firms to start-ups. Firms were surveyed for their perception on various benefits that could be attributed to technology. Responses were noted on a five-point scale, with five indicating strong agreement to adoption."

Increasing the use of IT IN Key user segments like airports, ICD and CFS have prompted large IT players such as HCL, Mahindra Satyam and Infosys to explore the logistics market for software products.

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