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Achieving sustainable operational excellence through IT implementation in Indian logistics sector: An analysis of barriers

https://doi.org/10.1016/j.resconrec.2019.104506Get rights and content

Highlights

  • IT implementation is crucial to operational excellence strategies in logistics sector.

  • Barriers to IT implementation in Indian organized and unorganized logistics are explored.

  • Fuzzy-ISM, Fuzzy MICMAC, and IRP are used to compare the sector-specific barriers.

  • Unorganized sector’s barriers differ substantially from those of organized sector.

  • Largely unorganized Indian logistics therefore requires sector-specific attention.

Abstract

Information Technology (IT) infrastructure has been integral to operational excellence approaches towards sustainable supply chains. The paper explores the crucial barriers to IT implementation in the largely unorganized logistics sector of an emerging economy, India. Through a comparative study using two separate expert-groups, representing the organized and unorganized logistics sectors respectively, the paper analyses their views on the criticality of barriers in each sector and highlights the sector-specific problems that hinder effective IT implementation. Considering the profiles of the expert groups used, the paper implements Fuzzy-ISM and Fuzzy-MICMAC analysis for one group and IRP for the other to capture and analyze their opinions appropriately. The results obtained from the analyses show that the barriers concerning IT implementation in the unorganized logistics sector (ULS) substantially differ from those concerning the organized logistics sector (OLS) as perceived by the corresponding sector experts. The study ranks the barriers in the two sectors and highlights the focus areas that require immediate attention to strengthen the IT infrastructure of Indian ULS, which suffers mainly from behavioral issues at the organizational level. Focused attention to unorganized sector’s requirements can revive the sector and smoothen its transformation to an organized one as exceedingly demanded by the recent e-commerce boom. The work is perhaps the first to address the Indian ULS. It implements a unique approach: seeks inputs from two different expert groups, implements tools appropriate to the respective panel profiles, and compares their opinions to identify the specific and different requirements of the Indian ULS with respect to IT implementation.

Introduction

Information Technology (IT) has been the backbone of innovations and sustainable growth across businesses for the past few decades. In recent years, almost every industry has attempted several initiatives to explore the possibilities of digital transformation and to harness benefits out of these changes (Matt et al., 2015). As far as one of the fastest-growing major economies – India is concerned, the logistics industry has been indispensable for national development, providing a livelihood to more than 22 million people. Given the amount and range of resources that the logistics industry encompasses, logistics sustainability (Lan and Zhong, 2018) is vital for supply chain sustainability. However, the Indian logistics sector accounts for 14% of GDP in terms of logistics cost, which is relatively very high compared to those of US (9.5%) and Germany (8%). The Government of India aims to reduce this cost to less than 10% by 2022 (Sharma, 2018). Citing reports from the Ministry of Commerce and Industry, Government of India, Sharma (2018) also explains the significance of Information and Communications Technology (IT) to strengthen the logistics infrastructure of the country. Gunasekaran et al. (2017) provide a comprehensive review on IT usage to attain competitive advantage in logistics and supply chain management.

The Indian logistics sector is largely unorganized, heavily fragmented and rough in nature with over 7 million freight vehicles on the road carrying a volume of around 1325 billion ton-km. The existence of a large number of small fleet owners having a fleet size of fewer than 10 vehicles essentially categorizes the Indian logistics sector as largely unorganized (Biyani, 2017). The organized service providers, on the other hand, are expected to provide storage and management of inventories apart from providing the traditional transportation services (Raghu, 2007). Additionally, organized players have large fleet sizes. Private players such as VRL Logistics have a fleet size of 2400, while DRS Logistics of Agrawal Packers and Movers have a fleet size of 550 (Raghu, 2007). Mitra (2008) identified several problems that plague the existing Indian logistics, nearly 90% of which is unorganized. Factors such as low margin-high cost business, absence of economies of scale, inconsistent tax structure, lack of awareness and trust among players regarding outsourcing, and poor physical and communication infrastructure make the sector unattractive for investments.

Operational excellence broadly includes comprehensive, systematic, and technological methodologies for industrial applications that include Internet of Things, Lean, Six Sigma, Blockchain, and Inter-organizational Information Technologies, among others. These measures not only improve the performances of traditional supply chains but also reinforce their structures and sustainability (“Operational excellence for improving Sustainable Supply Chain Performance,” 2019). The role of IT to support such operational excellence strategies in the logistics industry cannot be emphasized enough, particularly in a service-based economy such as India. One important function is that it links the different parties involved in the logistics network viz. manufacturers, transportation firms, retailers, and the end customers through effective information management. The accelerated pace at which IT is being adopted by the Logistics Service Providers (LSPs) in the past few decades can be attributed to numerous benefits contributing to efficient operations such as increased productivity, reduced operating costs, enhanced transparency, and timely delivery of goods. Despite the competitive advantages that can be leveraged through effective IT implementation, the challenges faced by the Indian logistics sector, dominated by unorganized players, raise the following questions. Firstly, is Indian logistics infrastructure-wise, financially and mentally prepared for the much required digital transformation? And secondly, is the sector at the ground level able to appreciate the prospect of effective IT implementation in bringing down the high logistics cost? These challenges also relate closely to the importance of social aspects of sustainability in developing nations where social issues often get undermined in comparison to its economic and environmental counterparts (Mani et al., 2016). As far as literature is concerned, managers and practitioners can benefit from effective frameworks that enable the adoption of operational excellence strategies. However, there have been limited studies on the scope of IT implementation in the ULS, especially in emerging economies. The present study attempts to capture, analyze, and contrast the views of two separate expert-groups on the critical barriers to effective implementation of IT in Indian OLS and ULS. The first group comprised of industry and academic experts closely associated with the OLS while the second group consisted of the firm owners and employees actually belonging to the vast unorganized logistics. The study aims to highlight the differences between the perspectives of the experts from the two sectors as far as difficulties to IT infrastructure implementations in these sectors are concerned. Two different methodologies viz. Fuzzy-Interpretive Structural Modelling (Fuzzy-ISM) and Interpretive Ranking Process (IRP), deemed appropriate for each group, respectively, have been used to analyze their views. The study is expected to enable the policymakers better understand and appreciate the specific requirements of the ULS in India and thereby provide some guidance towards more effective policy decisions.

The next section provides a background of the Indian logistics sector and IT in logistics followed by subsections explaining the identified barriers for conducting Fuzzy ISM and Fuzzy-MICMAC analysis and the identified parameters for conducting IRP. Section 3 talks about the methodology adopted for Fuzzy ISM and IRP analysis followed by Section 4, which highlights some important results. Section 5 discusses the results and compares the perspective of the two expert groups with respect to the barriers in organized and unorganized logistics. Section 6 concludes the study with some limitations along with future research directions.

Section snippets

Background

The LSPs, based on their level of customization of functions and types of services they offer, can be classified into three broad categories. The first type referred to as the standardizing LSPs, provide only the very basic services such as transportation or warehousing or both. The second type of LSPs, called the bundling LSPs, bundle a selected set of standardized functions together with a few value-added ones as per their customers’ demand. These LSPs additionally remain responsible for

ISM and Fuzzy-ISM

The understanding of direct and indirect relationships among the identified barriers is crucial to determine the dominance or dependency of one barrier over another. Accordingly, we use the Fuzzy-ISM technique in the following analysis.

ISM (Sage, 1977; Warfield, 1974) is an individual or group perceptions based paired-evaluation approach that helps in identifying and summarizing complex inter-relationships among the different entities of a system. It is interpretive because a group of experts

Results

The following sub-sections summarize the important results obtained from the two exercises.

Discussions

Section 4.1 provides the results obtained from first of the two analysis that used expert panel Group I. It can be inferred from these findings that among the barriers to IT implementation in Indian OLS, ‘Financial limitations’ are perceived to be the most critical. It is followed by ‘poor IT infrastructural issues’, ‘Lack of awareness about relevant IT pieces’ and ‘Information sharing and security risk among channel partners’ as far as the difference of driving powers and dependencies are

Conclusions

In this study, we analyze and rank the potential barriers to IT implementation in Indian organized and unorganized logistics. Two separate methodologies are employed for them, viz. the Fuzzy ISM and Fuzzy-MICMAC for the organized sector experts, who were well learned about pairwise comparing and analyzing the barriers while IRP for the unorganized sector experts who broadly shared the subjective idea about their perceived challenges. As discussed in the ‘Methodology’ section, the difference

Acknowledgments

The authors express gratitude to the 5 industry experts from organized firms, the 3 academicians from India’s top B-schools and 11 professionals comprising of owners and contractors of small logistic companies who took part in the different stages of discussions. The authors also thank the three anonymous reviewers for their valuable feedbacks.

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