How digitization simplifies logistics for MSME exporters

Logistics has always been the backbone of international trade. As supply chains are dispersed around the world and companies seek the most cost-effective and productive sources to produce and transport goods, the strength of a country’s logistics processes is critical to becoming a global manufacturing and export powerhouse. The black swan events like the Covid pandemic have only reinforced this belief among Indian exporters and the government to improve logistics capacities through mission-mode digitization as they aim for a $5 trillion economy.

Gradually, the logistics process for exporters is changing from a time-consuming and costly affair that is managed manually to a cost-effective and time-saving measure in terms of packaging, storage, goods transport and shipping through digital intervention step.

Digitization has played a very important role in logistics. Around 20 years ago everything was manual, while today all airports, seaports, inland container depots (ICDs), container freight stations (CFSs) are connected to one system. Even during Covid, all documents, invoices, packing lists, paper declarations at customs, terminal fees, processing fees, etc. were managed digitally. This was not possible before,” said Vipin Vohra, Chair of the Civil Aviation Committee, PHDCCI and Chair of Continental Carriers, during a panel discussion at the SMExports Summit 2023 organized by Financial Express Digital last month.

For example, in 2020, the Central Board of Indirect Taxes and Customs (CBIC) introduced a QR-coded shipping invoice for end-to-end paperless exports. After the duty-free export, the invoice is sent digitally to the exporters. This eliminates the need for exporters to contact customs officials to obtain proof of export and fully digitizes the customs export process – from freight invoice submission to final export order. The initiative was part of CBIC’s Turant Customs program, which aimed to reduce the time and cost importers and exporters spend sending and receiving goods.

“Faceless, contactless and paperless customs clearance is a great enabler that puts MSMEs on the same platform as large corporations when it comes to shipping goods with ease,” said Nikita Singla, Associate Director, Bureau of Research on Industry and Economic Fundamentals (BRIEF) in Panel discussion on the digitization of export logistics. BRIEF is a research and consulting firm specializing in policy research, diagnostic studies, program implementation, and industry and market research.

Not only the government, but also the ports are taking independent action, Singla said. For example, Digital Docket Delivery (D-Cube) is a paperless and contactless solution for import operations at the Port of Mumbai, eliminating the need for importers to walk around with physical documents. “They just need to scan an app with D-Cube to get their cargo delivered. So there is a lot happening in the digitization of export and import operations, but perhaps awareness is needed to leverage these measures,” she added.

In 2019, the government introduced a common digital platform for issuing electronic certificates of origin (CoO) as a central point of access for exporters or for all foreign and preferential trade agreements in India and for all authorities concerned. A CoO is an international trade document certifying that goods in an export shipment were wholly obtained, manufactured, manufactured or processed in a specific country. The new electronic platform enables the previously impossible digital exchange of CoOs with the partner countries.

These digital processes enable reduced transaction costs and time for exporters. “Today, as an MSME, you no longer have to invest in different processes. Some solutions are plug-and-play and available similar to Software-as-a-Service solutions. For example, to export carpets from Bhadohi City (center of carpet manufacturing) in Uttar Pradesh to Jebel Ali Port in UAE, where our terminal is located, you don’t have to deal with multiple people and processes. Digitization has brought the world very close. You just go online, log into a portal, select a service, pay online and the container reaches the nearest location while all the documentation is done in the backend,” said Akash Agrawal, CEO, Freight Forwarding, DP World Subcontinent, in the Discussion panel.

But according to Animesh Saxena, managing director and CEO of clothing manufacturer and exporter Neetee Clothing, there are still many gaps in the export process despite digitization.

“For example, to ship goods out of the port of Jawaharlal Nehru in Navi Mumbai, your cargo needs to clear customs there seven days before leaving the port. Even if the container is stuffed full, you are not sure if it will work. The flow of information is not seamless. You don’t get real-time data when the container is being filled, deployed and handed over to the shipping company and is on the ship,” said Saxena.

“In addition, customs in India do not work on official holidays. Therefore, to plan for shipments, I would suggest that exporters have a government calendar of public holidays in different states from which your goods will be cleared,” he added.

Another challenge is the country’s logistics costs, which account for around 13-14 percent of gross domestic product (GDP). Logistics costs include all expenses related to sourcing raw materials to paying a logistics company to facilitate distribution, including storage and inventory, transportation and distribution, labor, equipment and consumables, etc.

Indeed, during the launch of the National Logistics Policy last September, Prime Minister Narendra Modi said: “From 13 to 14 percent logistics costs, we should all aim to get them into single digits as soon as possible. In a way, this is low-hanging fruit when we need to become globally competitive.”

To cut costs, Singla said MAIL had proposed NITI Aayog to increase the railway’s share of domestic freight. She explained: Each passenger train has two freight cars and most of these are usually left empty or underutilized. That’s why we proposed an Uber-like model for companies to book at least one freight car online or via an app. In this way, the utilization of the wagons can also be improved without investing more money in the handling of goods.

In order to reduce logistics costs, the Ministry of Ports, Shipping and Waterways had inaugurated a national logistics portal (navy) in January this year, which aims to serve as a one-stop platform to connect all stakeholders of the logistics community using information technology. The portal aims to be a single window for all trading processes of the logistics sector, spread across the country, covering all modes of transport by water, road and air, together with an online marketplace to ensure a seamless end-to-end to provide logistics service coverage. Source: Financial Express

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