The industrial economy is dependent on centralized production, which by definition means that raw materials and parts have to be moved to centers of manufacturing. The efficiency with which goods are moved across the economy is key to its success. This makes logistics crucial. An old saying goes “Amateurs study tactics, armchair generals study strategy, but professionals study logistics.” Yet it is often under-rated and neglected. Efficient logistics is the backbone on which the global economy operates upon. Many of the breakthroughs in history have been breakthroughs of logistics. The horse made the Mongol Empire. The ships spread European imperialism around the world. The railroads unified India and the United States.
Even in the modern world, innovations in transportation have changed the way we do business. The container transformed the way shipping was done. Before containers shipping used to be an expensive undertaking and not very reliable. The container changed all of that. It allowed the size of the ships to increase dramatically. This scale has made shipping economically viable and led to the rise of outsourcing in manufacturing. The container has been one of the biggest driving forces behind the rise of East Asia.
On the American side, outsourcing of manufacturing went hand in hand with the growing influence of Walmart. Walmart changed retail through its integrated supply-chain. They were able to cut out the middlemen and deliver goods to consumers at cheaper prices than ever before. And now Amazon is doing to Walmart what Walmart did to traditional retail. E-commerce is just the next step in the innovation of logistics.
India, as has been the case since the advent of industrialization, has been a laggard in the game of logistics. There are many reasons for this. The large number of people that are dependent on the logistics sector, the bad conditions of the roads, the high number of middle men and a large bureaucracy. The GST is a step in the right direction to smoothen out the flow of good through-out the country, but more needs to be done. Rent seeking behavior from middlemen and petty bureaucrats is still a major reason for the slow movement of goods in India. Compared to global standards the distance traveled by trucks per day is less than half.
As has been the theme across my writing, IoT is an opportunity for India to make a leap in logistics efficiency. Various tracking solutions will allow the operators to oversee the shipment of goods across its entire journey. This technology can be a game changer. Many of the truck fleets in India are outsourced. This creates quality issues throughout the supply chain. Currently there is little visibility on the condition of the trucks and whether the shipment was made within the needed parameters. This variability results in losses of merchandize and substandard quality control. IoT is the solution for these issues. The transparency provided by tracking solutions, such as GPS, temperature and vehicle condition monitoring, will reduce operational losses and bring Indian Logistics up to global standards. IoT will play a crucial part in the growth of the economy for the next decade and even more so in India. The decentralized structure of the Indian economy means we have the most efficiency to gain from the IoT revolution.