India’s logistics companies, which handle millions of items ranging from apparel to smartphones and from toys to white goods, will soon have to follow uniform packaging standards at their cavernous warehouses. The government is working on packaging standards that would mandate optimum space utilization in warehouses, a move that would support its objective of lowering its logistics costs from a high 14-15% of gross domestic product (GDP) to the 7-8% seen in advanced economies.
The Union commerce ministry is working on standards that will cover racking arrangements, lifting, loading and unloading, two officials aware of the matter said, adding the rules will be part of the national logistics policy (NLP).
A draft of the standards will go through interministerial consultations, and the final rules are likely before the end of the fiscal year, said one of the two officials quoted above, both of whom spoke on the condition of anonymity.
Queries sent to the commerce ministry remained unanswered till press time.
The upcoming NLP framework, launched a year ago, is expected to encourage multi-modal transportation, and effective implementation of these standards and ensuring uniformity across states will be crucial for achieving cost parity in the logistics sector. The cost savings are also expected to foster value addition and enterprise, the first official added.
The NLP, along with PM Gati Shakti, aims to integrate the various arms of India’s logistics sector, with the goal of reducing the costs to 8% of GDP over five years. Cheaper logistics is critical for greater competitiveness, both domestically as well as worldwide.
Many modern warehouses are under-utilized and costlier to operate due to the lack of standard packaging, the second official said. Besides, transporters face challenges in loading packets to full capacity, stalling the supply chain and creating shortages, the official added.
This also adds to costs, as truckers charge clients for the entire capacity of their vehicles even when trucks are not fully loaded due to lack of standard-sized packaging, leading to empty spaces called idle freight. Uniform standards are expected to weed out much of these costs.
According to India Brand Equity Foundation, a trust established by the commerce ministry, warehousing, industrial and logistics sectors are crucial to achieve India’s target to turn a $5-trillion economy by FY25. India’s retail sector may grow at a CAGR of 9% between 2019 and 2030, totalling over $1.8 trillion, it said.
The government’s move has been widely hailed by industry, across logistics companies, storage enterprises and e-commerce firms. “The introduction of standardization will lead to higher efficiency in operations, resulting in reduced costs. Harmonizing packaging, labelling, container standards, process standardization, and ICT standardization will be crucial steps toward addressing these challenges,” Vikas Choudaha senior vice-president and business head, Godrej Storage Solutions, said.
Easwaran Subramanian, a consulting partner at Deloitte India, felt that formulation of packaging standards will have a multi-dimensional impact on the market, including on cost and efficiencies from improved loadability, effective utilization of logistics and warehousing assets, and standardization of transportation models.” At the same time, he added that effective implementation of packaging standards and uniformity across states will be key.
Zaiba Sarang, co-founder of iThink Logistics, hailed the packaging standards as “a commendable move” towards efficiency, safety, and sustainability. “Standardizing packaging practices will streamline operations and minimize wastage and environmental impact,” Sarang said.
The rules will be “pivotal” in achieving uniformity in warehousing infrastructure nationwide and aid space utilization, said Partha Dash, managing director, new business & growth at Moglix, a business-to-business e-commerce company. “The forward-thinking initiative targets reducing this contribution to a single-digit percentage, aspiring to align with the global average of 8% (logistics costs as share of GDP) by 2023,” Dash said.