Logistics in the Food System is the most important segment that is responsible for the redistribution of processed food across the market. According to the Food and Agricultural Organization (FAO), approximately 14% of the world’s food is lost between harvest and retail. It is due to inadequate cold chain facilities and poor temperature management during transportation. Hence, to ensure food safety and the economic viability of the food processing industry, strengthening the logistics sector is the need of time.
Current State of Food Logistics Sector in India
India’s Food Logistics sector has gotten a significant boost with government policies oriented towards giving an impetus to it. The government policies in the warehousing and transportation sector have given an edge to the food processing industry.
PM GatiShakti National Master Plan
It was launched by the government of India to provide multimodal connectivity infrastructure to various economic zones. PM GatiShakti is a transformative approach for economic growth and sustainable development in the logistics sector. The approach is driven by 7 engines, namely: Railways, Roads, Ports, Waterways, Airports, Mass Transport, and Logistics Infrastructure.
Benefitting Food Logistics Sector
The plan integrates various transportation modes such as highways, ports, aviation, and inland waterways. It emphasizes cross-sectoral cooperation between various ministries and departments. The plan leverages advanced technologies such as AI and IoT to improve infrastructure management and planning. The plan aims to reduce the logistical carbon footprint, free up traffic on high-density rail lines, and facilitate the switch from road to rail and coastal shipping. Hence, for the food processing industry, the plan aims to reduce operating costs and quick delivery of perishable food.
National Logistics Policy
The policy aims to lower the cost of logistics from the existing 13-14% and lead it to par with other developed countries. The reduced cost will also increase efficiency efforts cutting across all sectors of the economy. The policy seeks to reduce the logistics cost from 16 percent of the Gross Domestic Product (GDP) to a global average of 8 percent by 2030.
Integration of Digital System (IDS)
It aims to integrate various departments such as road transport, railways, aviation, commerce ministries, and foreign trade.
Unified Logistics Interface Platform (ULIP)
It ensures shorter and smoother cargo movement and enables the exchange of information confidentially on a real-time basis
Ease of Logistics (ELOG)
It aims to enable and ensure the ease of logistics business through transparency and accessibility
System Improvement Group
It aims to monitor all logistics-related projects regularly.
The policy also aims to integrate existing schemes such as Sagarmala, Bharatmala, and PM Gati Shakti.
Warehousing Policies
Apart from infrastructure, the government has various policies aiding warehousing an important part of the food logistics sector.
- The government provides a 100% deduction permitted on capital expenditure for cold chains or warehouses.
- There are provisions for setting up warehouses in ‘Mega Food Parks’ which are integrated with transportation and processing industries.
Integrated Cold Chain and Value Addition Infrastructure Scheme
- The central government launched this scheme to provide integrated cold chain and preservation infrastructure facilities.
- It covers the creation of infrastructure facilities along the entire supply chain such as pre-cooling, weighing, sorting, grading, and waxing facilities at the farm level.
- It also includes multi-product/multi-temperature cold storage, CA storage, packing facility, IQF, blast freezing in the distribution hubs, and reefer vans.
- The scheme also provides mobile cooling units for facilitating the distribution of non-horticulture, horticulture, fish/marine(except shrimp), dairy, meat, and poultry.
State of Food Logistics Market
- The Indian warehousing market is predicted to reach US$ 34.99 billion (Rs. 2,872.10 billion), expanding at a CAGR of 15.64% from 2022 to 2027.
- Food and Beverage is a part of Fast-moving consumer goods (FMCG) which constitutes the second largest segment among other logistics segments.
- Further, groceries and food delivery from the food sector are also part of the e-commerce segment.
Key Developments in the Warehouse Sector
With the advent of Industry 5.0, the warehousing sector has witnessed significant developments from storage to transportation of food items. It includes the use of cutting-edge technology for storing, monitoring, and controlling.
Technology-Based Monitoring
- The food-based logistics sector has witnessed the use of technologies such as the Internet of Everything (IoE), Artificial Intelligence, and blockchain technology
- Food Sensors integrated with IoE and AI regularly monitor the food quality in the supply chain.
- Disposable Active Trackers are used for real-time tracking of packages inside the shipment. It uses GPS tracking devices for one-time use. It uses satellite and cellular technology to provide real-time tracking information to an online platform or app.
- Cloud Solutions are being used for supply chain management across various domains to monitor the supply chain effectively.
Smart Packaging
This packaging incorporates embedded sensors, RFID tags, or other electronic components to monitor and track the condition of food products within a warehouse. It allows real-time visibility into inventory levels, product quality, and storage conditions. It can also detect tampering with the packaging ensuring food safety.
Material Handling
The use of automotive machines coupled with AI and IoE has made material handling easy and affordable. It also eliminates the chances of human error and makes food items safe from contamination.
Challenges Faced By the Global Food Logistics Sector
Transportation
The food Logistics Sector has been witnessing various transportation issues such as disruptions caused by extreme weather, natural disasters, conflicts, pandemics, and political situations. These disruptions cause delays in the transportation of perishable food products causing loss to the industry.
Warehousing
Social events such as strikes and recession, terrorist attacks, economic or financial crises, and interruptions of essential services such as electricity supply also lead to disruptions in the warehousing sector.
Quota Based Market
This market is characterized by a cap on the import of specific products causes loss to importers if imported more than the limit. For example, the United States has an import quota that limits the volume of Scotch liquor produced in Scotland annually. If the limit is breached the US imposes a import tariff.
Food Price Volatility
The rapid increase and decrease in the prices of food products impact the logistics sector. It impacts the logistics sector by creating uncertainty in demand forecasting, leading to fluctuations in transportation volumes, potential storage issues due to changing inventory levels, and increased costs associated with managing price fluctuations. It affects operational efficiency and profitability within the logistics industry.
Market Outlook of Food Logistics Sector: Expectations of Growth
There is a rising demand for fresh produce and online food deliveries across the world. Hence, the global food logistics market is heading towards significant growth in the coming years due to rising demand. Technological advancements and government initiatives will also help the market.
Market size
The market size of the global food logistics sector was valued at USD 122.19 billion in 2023. It is expected to grow to USD 221.08 billion by 2032.
Market Drivers
Increasing Demand for Fresh Produce
There is an increasing demand from Consumers for fresh produce, organic foods, and health-conscious choices. It has given rise to quick e-commerce and home delivery services are contributing to market expansion of the food logistics sector.
Expansion of Cold Storage
According to Ken Research, the global Cold Chain Logistics market was valued at USD 275 Bn in 2023. It is driven by increasing demand for perishable food items, pharmaceuticals, and temperature-sensitive products. The rapid growth of e-commerce and globalization of trade has also significantly contributed to the market’s expansion of cold chain logistics.
Way Forward: Logistics in the Food System Embracing New Era Expansion
The rise of quick commerce and demand for fresh and conscious food items has boosted the food logistics sector yielding it an expansionary overtone. The advent of Food 5.0 aided by food sensors, IoE, and new-era cutting-edge technologies has further boosted the capabilities of the sector making it profitable by reducing food wastage. The sector seeks to embrace growth in India amid the new government policies aided by master plans such as PM-Gatishakti and National Logistics policies. Overall, technology and governance have boosted the capabilities of the food logistics sector.