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We take a look at how digital solutions for logistics management can drive MSME growth. The Union Interim Budget, announced on 1 February 2024, by the Finance Minister, Nirmala Sitharaman, highlighted economic growth and development as focus areas. A significant allocation has been made for infrastructure and logistics development (approximately ₹11.11 lakh crores) and for technology R&D and innovation in the private sector (around ₹1 lakh crores). These provisions clearly indicate the priorities of the government. In this article, we take a look at how the Interim Budget 2024 impacts the logistics sector, especially with reference to the innovations in digital solutions and transformations and how Micro, Small and Medium Enterprises in India can make the most of it.
Also read: Interim Budget 2024-25 key highlights
Key highlights on logistics and technology – Interim Budget 2024
Before taking a look at how the Budget announcements will empower MSMEs and logistics management, let’s first look at the key announcements that will impact digital solutions for logistics management in the future.
- New railway corridors – How it will enhance logistics efficiency and cost reduction, and bring drive supply chain optimisation
- Airport infrastructure development – New business opportunities for MSMEs and required technology adoption
- E-Vehicles and e-Buses – How growth in automobile sector impacts logistics w.r.t. digital tracking, new technologies, digitalisation etc.
Establishing 3 commodity specific railway corridors
Much is being talked about the plan to build three new railway corridors to boost the economy. These will be for:
- Energy, mineral and cement corridors
- Port connectivity corridors
- High traffic density corridors
The initiative will be a part of the PM Gati Shakti programme and is expected to foster multi-modal connectivity across the area.
Impact on Indian logistics sector:
The initiative is expected to bring logistics efficiency, reduce turnaround time, remove congestion in rail connectivity, and lead to lesser costs. It is also expected to make rail transport (especially for passengers) agile, safe and convenient, and simplify logistics management.
Digital solutions for logistics management:
In a transformative stride, several forward-thinking initiatives for rail transport was introduced in the Interim Budget. It stands testament to the government’s aim to infuse vitality into the transport backbone. These initiatives will not only enhance the passenger experience but also propel trade and commerce. Of course, the integration of digital solutions in logistics management is crucial here.
While there are several ways digitalisation and technology adoption can be utilised, here are three innovative approaches that MSMEs can adopt and have the potential to redefine logistics management in railways.
1. Real-time tracking mechanism
By using relevant technology and software solutions, real-time digital tracking of freight can be a game-changer. This will require coaches or bogies to be GPS enabled providing visibility into the location, movement and status of goods.
Considering that the corridors will help to bring efficiency and reduce turnaround time, this critical information will empower businesses and also provide security and monitor cargo movement, digitally.
2. Warehouse automation and smart terminals
Automating warehouses and building tech-enabled smart freight terminals can revolutionise how goods are loaded/unloaded, managed and stored. By incorporating advanced robotics, AI and IoT technology these smart terminals can minimise handling errors, lessen turnaround time, and optimise storage. This in turn will reduce wastage, bring supply chain optimisation, and overall efficiency in the logistics chain.
3. Predictive logistics management with data and AI
Another advantage of adopting digital solutions for logistics management is the ability to use Big Data analytics and AI for demand forecasting and predictive logistics management.
Railways can move vast volumes of freight, and considering these are commodity specific corridors, it is likely the volumes will be enormous. By analysing vast datasets on freight movement in the selective routes, pattern of weather, and market demand, AI tools can predict potential disruptions, optimal routes, and even provide alerts. It can also schedule coach maintenance routines to ensure timely servicing.
Together, these initiatives will facilitate better delivery of goods and operational sustainability, reduce fuel consumption and carbon footprint.
The MSME advantage
The obvious question at this point is, how can MSMEs and logistics startups benefit from these initiatives. The Interim Budget highlights how the government is working towards MSME growth and aims to make finances, training support, and technology solutions easily available. Some of the ways in which MSME inclusivity and sustainability can be achieved include:
- Technology partnerships – Where MSMEs can collaborate with large enterprises to offer tailored, niche solutions for railways. The Interim Budget focuses on technology innovation and sets aside a corpus of ₹1 lakh crores for the same. MSMEs and new startups can leverage innovation and nimbleness to design affordable, bespoke applications to address the specific challenges in railways logistics.
- Building a digital supply chain ecosystem – By using technologies like Blockchain, MSMEs can build a robust digital supply chain ecosystem. It can facilitate transparent transactions, record all transactions, and help to build credibility.
- Skill enhancement – The Interim Budget also mentions achievements on skill training (i.e., Skill India Mission, having trained 1.4 crore youth, re-skilled 54 lakh, and set up 3,000 new ITIs). By acquiring the right digital training, MSME workforce can leverage these opportunities. The government has already launched several programmes for MSME skill enhancement related to digital skills. (Read: Courses in Central Institute of Tool Design, Hyderabad and MSME Tool Room, Kolkata)
Focused aviation development
Air travel has become a popular choice of commute for many travellers. It’s also a safe and quick way for carrying goods, especially those that require quick delivery.
The Interim Budget also highlighted the colossal growth in the aviation sector, especially with 517 new routes, 1.3 crore air travellers, doubling of airports to 149, and roll-out to Tier-II and Tier-III cities under the UDAN scheme. Moreover, carriers have also placed orders for 1000 new aircrafts and the government has plans for infrastructure development for new and existing airports.
How will it impact logistics management?
Technology adoption in aviation logistics management not only can improve the operational dynamics of aviation but also enhance air travel experience, improve trade, and empower MSMEs.
1. Route optimisation leading to reduced costs
While 517 new routes have already been launched, it can be expected that new routes will be identified. Digital tools can be used to identify these routes using advanced algorithms and real-time data. This will significantly help in fuel savings, reduced flight times, and operational costs.
The availability of cheaper and faster shipping options, will encourage competitiveness in MSMEs enabling them to expand markets, acquire new customers, and even compete globally.
2. Enhanced supply chain
Using digital tools, airlines can have complete supply chain visibility for all air cargo. This will facilitate timely delivery leading to reliability.
This is crucial for MSMEs, who often work with limited resources. Many small businesses often operate using JIT or similar models to reduce inventory holding costs, avoid wastage, and cater to customer orders efficiently. Enhanced visibility and predictability on air freight services can enable MSMEs to plan strategically, improve supply chain optimisation, and offer better customer experience.
3. Impact on trade and commerce
The goal to develop existing airports and build new ones can enable MSMEs to now consider faster modes for goods transport.
Air transport has always been expensive, and this has often been a barrier for MSMEs. With development across Tier-II and Tier-III cities, there will be easier and more affordable access to air freight services. Whether for domestic or global trade, digital tools can be utilised to provide visibility, data accuracy, compliance, and document tracking.
4. Other benefits in logistics operations
Digital solutions can be adopted for several other purposes based on the component of logistics management it caters to. And MSMEs can play its role in it.
For instance, AI tools and innovative designs can be used to build freight matching platforms, to match cargo with available airline freight capacity. This will optimise cargo capacity, expedite shipping processes, and reduce transport costs.
MSMEs can not only contribute towards building such platforms but also leverage its benefits by tapping into unused cargo space and paying competitive rates for it.
Electric vehicle infrastructure development
The government is also prioritising sustainability and encouraging businesses to adopt sustainable solutions. From promoting green manufacturing to introducing measures for managing climate change, sustainability is high on the government’s priority list.
In the Interim Budget, not surprisingly, there’s mention of adopting electric vehicles and buses for communicating in an eco-friendly manner. There’s mention of a plan for manufacturing of EVs and providing the required infrastructure support through adequate charging stations.
Moreover, for public transport, adoption of e-Buses is also emphasised. Digital technology will be adopted for digital payments in a secure and convenient way
What this means for logistics and supply chain systems?
EVs represent a paradigm shift in transportation technology, enhancing the efficiency and sustainability of logistics operations. Here’s how digital integration can benefit MSMEs and logistics management.
- For the logistics and supply chain system, EVs mean reduced expenses, less pollution/ carbon emission, and sustainability.
- It also means leveraging certain tax benefits and incentives from the government for green logistics.
- The expansion of e-Vehicles is also expected to create demand for steel and the automotive industry. This in turn will lead to efficiency in automotive logistics, right from the supply chain planning to the storage and movement of vehicles.
What MSMEs can look forward to?
Logistics is an important component for all businesses. It’s an important contributor to the country’s GDP contributing almost 14.4% to the nation’s GDP. It provides employment to over 22 million people and is expected to create employment for over 1.2 million people by 2025.
The Union Interim Budget clearly outlines the roadmap and investments the government aims to make in infrastructure development, technology adoption, and tax reforms which can be pivotal for the transformative growth of the logistics sector.
Also read: GST impact on logistics
For MSMEs, the future looks bright and lucrative. There are opportunities across the logistics industry, especially in digital technology adoption for efficiency and cost reduction. While most large logistics operators and many smaller players have taken to digital solutions for logistics management, it’s still an unchartered territory for many MSMEs. Technologies like GPS enabled vehicles for digital tracking, digital payments mechanism for transparency, digital billing and invoicing for quick access and reduced paperwork, online shipment booking, app-based notifications for enhanced customer engagement, etc. still remain unexplored by many.
There are different challenges businesses face when going online, but the merits are many. For MSMEs, the way forward therefore is to take their business digital, upskill to stay competitive, and leverage the various government incentives and market opportunities to grow and expand their business.
Also read: Interim Budget 2024 – ₹1 lakh crore corpus for technology and innovation – What it means for businesses
(For more information, visit the government website to learn about the Union Interim Budget 2024)