India’s entry into the Amrit Kaal embarks its vision and roadmap for country’s growth and development. To meet this vision, there is a need to build a prosperous and inclusive economy focusing on infrastructure, innovation, and sustainability. The logistics sector is among the various sectors which will play a critical role in achieving this vision. Urban areas currently constitute only 3% of the country’s land mass but they contribute 60% to the GDP. This clearly establishes the role of Urban Logistics as India enters its Amrit Kaal.
Urban Logistics encompasses the storage and movement of goods within cities with an aim to reduce supply chain and operating costs along with reduction in traffic congestion, pollution and environmental impact. As e-commerce and quick commerce continue to gain traction across these urban areas, the sector is experiencing significant growth. This upward trend reflects the increasing complexity and demand for efficient logistics solutions to meet the needs of modern consumers. There are two core aspects of urban logistics. First, warehouses (and Fulfilment Centres) that house a diverse range of SKUs that are needed to serve the ever-demanding customer. Second, mid-mile and last-mile logistics to transport the desired goods from warehouses to end-consumer customer on time.
Warehousing and Urban Fulfilment Centres
Warehouses in urban logistics can be categorized into those located on the city outskirts and those situated within the city itself. Outskirts warehouses are typically large, providing substantial capacity and infrastructure for loading and unloading. With the surge in e-commerce, these warehouses are increasingly handling higher volumes of goods, necessitating upgrades and automation, as well as a skilled workforce to efficiently manage these extensive fulfillment centers. A notable shortage of “Grade-A” warehouses, a high-quality facility that meets the highest standards in terms of design, construction, and operational efficiency, to adequately serve adjacent cities has led to significant inefficiencies in the system. This deficiency contributes to elevated storage and handling costs, reduced throughput, and ultimately higher operational expenses.
However, implementation of an effective warehouse management system (WMS) in the existing warehouses can play a crucial role in addressing these inefficiencies. By implementing advanced WMS, warehouses can optimize inventory management, streamline order processing, and enhance operational efficiency. A well-integrated WMS enables real-time tracking of inventory, improves accuracy in order fulfilment, and facilitates better space utilization. This, in turn, helps in managing high volumes of goods more effectively, reducing operational costs, and minimizing delays.
In-city warehouses, such as dark stores and micro-warehouses, are vital for the rapid growth of quick commerce. The rise in gross merchandise value (GMV) in this sector has driven increased demand for commercial properties that can be adapted into dark stores. Space constraints often necessitate multi-story constructions (G+2 or G+3), complicating picking and put-away operations. Additionally, these facilities are frequently situated in densely populated areas with inadequate loading and unloading infrastructure.
The combination of small order sizes and high delivery frequency demands quick turnarounds, which rely heavily on manual labour due to limited automation. Traffic congestion around these dark stores further disrupts delivery schedules and can result in breaches of stringent service level agreements (SLAs) imposed by quick commerce companies. To address these inefficiencies, there is often an over-deployment of vehicles by last-mile logistics operators to these dark stores.
Enhancing warehouse management practices, optimizing the design of dark stores and micro-warehouses, implementing live route optimization, and advancing urban infrastructure can significantly alleviate these challenges.
Innovation in Urban Transportation
Transportation within urban logistics is fraught with challenges that significantly impact the efficiency and cost-effectiveness of the supply chain. These challenges are especially pronounced in major Indian cities such as Mumbai, Delhi, and Bengaluru, where the complexities of urban logistics are exacerbated by the rapid growth and density of urban populations.
Traffic congestion stands out as one of the primary issues affecting urban logistics. The dense traffic conditions prevalent in these cities lead to substantial delays in delivery schedules. As a result, travel times are extended, and operational costs increase. Managing this congestion is becoming increasingly complex as urban areas expand. To address this issue effectively, there is a growing need for sophisticated route optimization technologies and real-time traffic data to minimize delays and enhance operational efficiency. Also, alternative delivery methods such as bicycles or drones can be used
In addition to traffic congestion, the limited availability of parking and loading zones presents a significant challenge. In densely populated urban areas, the scarcity of designated spaces for loading and unloading exacerbates delays and inflates costs. Delivery vehicles frequently struggle to find suitable parking, which further complicates logistics operations. This problem is compounded by inadequate infrastructure in many urban areas, which lacks the necessary facilities for efficient loading and unloading. Improving urban infrastructure and creating dedicated loading zones are essential steps towards mitigating this issue.
Moreover, zoning and access restrictions add another layer of complexity to urban transportation. Many Indian cities have stringent regulations that restrict the times and types of vehicles permitted in certain areas. These restrictions can hinder the smooth movement of goods and lead to inefficiencies. Collaborative efforts with city planners to revise these regulations, combined with the adoption of smaller, more flexible delivery vehicles, can help alleviate these constraints and improve logistics operations.
Environmental regulations are becoming increasingly stringent in India, with many cities implementing low emission zones to address pollution concerns. While these regulations are crucial for environmental sustainability, they introduce additional restrictions on vehicle types and require investments in cleaner technologies. Adapting to these regulations involves not only investing in electric or hybrid vehicles but also optimizing routes to minimize emissions and comply with environmental standards.
The quality of infrastructure poses yet another challenge. Many urban roads in India are in poor condition, with issues such as potholes and inadequate signage contributing to delays and increased vehicle maintenance costs. Advocating for infrastructure improvements and ensuring regular vehicle maintenance are crucial measures to address these challenges and enhance the efficiency of urban transportation.
Furthermore, high operational costs present another concern. Factors such as rising fuel prices, labor costs, and vehicle maintenance contribute to the overall expenses associated with urban logistics. Enhancing operational efficiency through technological solutions and improved logistics planning can help manage these costs effectively.
Driver unavailability due to the reliance on gig workers is a significant issue impacting urban logistics. While the gig economy provides a flexible workforce, it also introduces unpredictability in driver availability, which can disrupt delivery schedules and affect service consistency. To address this challenge, exploring strategies to improve workforce stability and ensuring that gig workers are adequately supported and incentivized are crucial steps.
Security concerns also pose challenges in urban areas, with higher risks of vehicle theft and cargo tampering. Implementing security measures such as GPS tracking, secure cargo containers, and driver training can help mitigate these risks and safeguard the integrity of the logistics operations.
Lastly, the complex delivery requirements of urban logistics further complicate the landscape. Indian cities often experience diverse and demanding customer requirements, including time-sensitive deliveries and specific delivery windows. Advanced scheduling systems and improved customer communication are essential for managing these complexities effectively.
Addressing these multifaceted challenges in urban logistics requires a comprehensive approach that combines innovative solutions, strategic planning, and collaboration with local authorities. By tackling these issues head-on, it is possible to improve transportation efficiency and effectiveness in India’s rapidly evolving urban landscape.
Conclusion
Although urban logistics in India faces numerous challenges, the combination of increasing customer demands, and a dynamic private sector supported by favourable government policies has the potential to transform the sector. Government should partner with industry in PPP (Public-Private Partnership) to promote compliant urban logistics real estate, utilities and support infrastructure. With the right strategies in place, Indian urban logistics has the potential to enhance value by significantly improving efficiency and cutting costs.
Sumit Kumar
Sumit Kumar is a strategy consultant with a deep understanding of the chemicals sector and has worked with clients on multiple engagements developing market entry strategies and business development plans. Prior to consulting, Sumit has worked in a petroleum refinery and has been involved in commissioning of global-scale petrochemicals projects.
Saptarag Hota
Saptarag Hota , Consultant, Avalon Consulting, is a strategy consultant with an expertise in Chemicals sector and Supply Chain domain. Saptarag has worked with clients on multiple engagements developing market entry strategies, logistics network design,and financial models. Prior to consulting, Saptarag has worked in an integrated fertilizers and chemicals manufacturing firm.
