How To Start A Logistics Business In India?

Table of Contents:

1. Starting A Logistics Company

2. Logistics Business Ideas

3. Required Permissions For Logistics Business

4. Competition In Starting A Logistics Company

5. FAQs On Logistics Business Ideas

1. Starting A Logistics Company

The logistics sector is currently valued at a mammoth $160 billion. It is growing at an unprecedented rate and is expected to grow to $215 billion in the next two years. If you’re looking to start a business, the logistics industry has immense potential. However, there are some serious deliberations you will have to make to start a logistics business in India.

2. Logistics Business Ideas

Here is how you can begin a logistics business in India:

1- A Business Model

The most important aspect of having a logistics business is a business model. Typically, a third-party logistics provider transports and delivers different products. They also provide other transport-related services like warehousing, customs brokerage, managing supply chain, and much more. Third-party logistics also includes software services that help in the seamless tracking and tracing of delivery items. Fourth and fifth-party logistics service providers oversee the whole supply chain of companies.

Determine whether you will start your firm or work with reputed firms on a franchise agreement. Both models require a substantial amount of networking—next, zero in on a specific supply chain role. You can have a business that manages the packing and tags items with RFID tags for easy tracking. You can provide warehousing, depending on your capacity, select a specific role.

2- A Business Plan

Study the market carefully. Determine how much capital you will need in your endeavour. Find out the usual time required to recoup the investment. What is the growth potential for the specific role you will be performing? What are the inherent risks? What are the legal requirements you will have to fulfil? Draw a business plan that factors in everything and if it is working out on paper, go ahead with the plan.

3- Risk Management

The logistics sector is a dynamic market. On top of that, in emerging economies like India, the risk gets bigger because of the different stances of regulatory bodies, the state Governments, and the Central Government. Other than that, Indian roads are infamous for their unreliability. Thousands of road accidents take place daily. A logistics provider with an accident on their hand can say goodbye to tens of lakhs of rupees. It is important to factor in the huge risks associated with the business while chalking up a business plan.

4- Capital

When you are done with your business plan, you will know the amount of capital you need. Think about how you can arrange for capital, choose between bank loan, venture capital, or your own funds. Finally, while investing, keep the following in mind:

1. Do not invest everything in your pocket, and
2. Have a mix of debt and equity for the best returns.

Once you have prepared the means to get your initial investment, think about the working capital. You will need capital for the day-to-day operations of the business. You should always have a good amount of working capital for a smooth process.

Acquiring delivery vehicles is an expensive affair. The EMIs on trucks and delivery vehicles are a major part of a logistics company’s costs at the start. Consider the following options when procuring delivery vehicles:

1. Financial lease and rental agreements: This way, your delivery vehicles are funded by revenue, and you will not have to worry about paying instalments.
2. Paying in instalments: Delivery vehicles are an expensive affair. You can pay a certain sum of money upfront and pay the rest in EMIs. EMIs will increase your working capital substantially.

3. Required Permissions For Logistics Business

Some licenses and permissions need to be taken when starting a transport and delivery logistics business. You will need to create a company, firm, partnership, or LLP, depending on your business plan. To do that, you will have to get the required approvals and permissions from the Ministry of Corporate Affairs and related departments.

Next, if you are going to be operating inter-state, you will need special permission. Freight forwarders have to register themselves with the Air Cargo Association of India. Other than that, you will have to obtain a copyright for the company name and trademark for the logo and slogans of your company.

Delivery Vehicles

You will need delivery vehicles if you decide to become a transportation and delivery logistics provider. Buying delivery vehicles is a really expensive affair. You might not get sufficient debt to cover the costs. If you have substantial capital and plan to remain in the sector for a long time, then go for buying delivery vehicles. Otherwise, you can lease delivery vehicles. You can also purchase second-hand delivery vehicles; they are affordable and come with a warranty sometimes.

Choose your delivery vehicle very carefully. You cannot buy a small delivery vehicle if your operation is wide-scale. Think about the items and number of things you will be delivering before purchasing or leasing delivery vehicles.

Quality Drivers

Road accidents cost an excessive amount of money for companies. A logistics provider cannot afford to have a road accident on their hands. To avoid this situation, verify the driver’s license of potential drivers. Check their backgrounds and enquire about them with their former employers. Experienced and quality drivers will ensure that your items are delivered on time. They will also make sure that you do not get embroiled in a legal issue.

Potential Customers

The first thing to do when finding customers is to leverage your connections and network. Find out if someone is looking for a logistics provider by asking around in your network. Explore different opportunities, and do not jump at the first opportunity you get. First, evaluate and then take an option that suits your requirements.

The best way to find customers is through the internet. The internet is a wonderful place that millions of Indians frequent daily. Advertising on social media and other spaces is affordable and provides an excellent return on investment. It is also quick and easy.

Embrace Technology

Utilise technology fully. Team up with a software logistics company and provide 24x7 tracking of all delivery items. With RFID tags and bar scanners, it is easier than ever to have this service in your armoury. Your tracking software should be easy to interact with. Other than that, provide constant updates to your customers via SMS and WhatsApp. With technology, you do not have to update them manually; the software will automatically send updates.

4. Competition In Starting A Logistics Company

There is a lot of competition in the market because multinationals operate freely in the sector. You will have to provide highly competitive rates to stay relevant in the market. You will also have to be reliable all the time to maintain a steady clientele. But at the end of the day, there is a lot of potential in the logistics business, and you can do extremely well for yourself.

The logistics industry is a highly lucrative one. It has been growing at a compounded annual growth rate of 8-10% in the last decade.

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5. FAQs On Logistics Business Ideas

Q. What are the risks associated with the logistics industry?

Ans: Road accidents can result in huge amounts of losses for logistics providers. Opt for an insurance policy to secure yourself against these losses. Other than that, India is a dynamic country where lots of regulatory changes happen all the time, so keep yourself updated.

Q.Should I buy my vehicles or lease them?

Ans: Buying delivery vehicles is an expensive affair. If you don’t have a substantial amount of capital, go for leasing. Buying can massively increase your working capital costs as you will have to pay EMIs.

Q. There are a lot of logistics providers, including large multinationals. Will I be able to compete?

Ans: It all comes down to one thing: value. If you’re providing value to companies, you will be able to succeed in any sector. Think about providing value to your customers: be quick, be efficient and bring the cost of logistics down for your customers.

Q. What technological innovation should I incorporate in my logistics business?

Ans: Blockchain is gaining traction in the logistics industry. The logistics industry in India has a lot of paperwork burden. You can incorporate blockchain to lessen your paperwork burden. You will also have a first-mover advantage since very few logistics service providers have incorporated blockchain as of now.

Q. Road accidents result in huge losses for logistics companies. What can I do to secure myself against mishaps and accidents?

Ans: Insurance is a must in the logistics business. Carefully scrutinise the insurance policies provided by insurance companies and select the ones that suit your requirements.

Q. What can I do to prevent accidents in the first place?

Ans: Electronic Logging Devices (ELD) are emerging as a new-age high tech solution for preventing road accidents. These devices track how long a driver has been on the road in a day. Indian truck drivers are notorious for driving without sleep to deliver items as fast as they can. ELDs will tell you if a driver is driving for too long. You can rest him after he drives a certain amount of hours in a day.