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Digitization of Logistics Bussiness in India (Research Paper) 2023-1

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Title: Digitization of Logistics Business in India

Past, Present and Future

Research Paper by: Submitted To :

Bharat Hariram Choudhary Mr. Chetan Soni

Zainso Global Trade LLP

Address : Shivank, 4th Floor, Office No 201,Off FC Road & Apte Road, Opp Venus Traders,
1225/G Shivaji Nagar, Pune, Maharashtra 411004, Bharat (India).

www.zainsoglobal.com
Acknowledgement

Summer internship is basically done for purpose knowing about the particular field in detail. It
gives more practical knowledge about the company’s procedure and their system

Summer internship can be helpful since it can lighten my course load during this semester. I did
an internship in the below mentioned company

Zainso Global Trade LLP

In that organization I found many employees involved in their work sincerely. In that I got one
person named

Mr. Chetan Soni

Who had helped me to understand about the company and industry. Logistics management is
the part of supply chain management that plans! Implements! And control the effective!
Efficient forward! And reserve flow and storage of goods! Services and related information
between the point of organ and the point of consumption in order to meet customers’
requirements
INDEX

SR. No. Topics Page No.


1 Abstract 4
2 Introduction 4

3 Literature Review 8

4 Discussion 10
5 Conclusion 19
6 Reference 20
Abstract
The purpose of this study is discuss about the digitization of logistics business in India and the
link between the last industrial revolution and its impact on the evolution of logistics and then
to present the various optimization opportunities and risks, with a focus on efficiency
performance along with future logistics scenario and also to identify factors that are important
for logistics organizations from the perspective of readiness for digitization of logistics
operations.

Introduction
Logistics is regarded as the backbone of the economy as it ensures efficient and cost-effective
flow of goods and other commercial sectors depend on it. Logistics industry in India is evolving
rapidly. It is the interplay of infrastructure, technology and new types of service providers,
which defines whether the logistics industry will be able to help its customers reduce their costs
and provide effective services. Despite weak response, the logistics industry continues to
witness growth owing to the progress in retail, e-commerce and manufacturing sectors. Rise of
e-commerce logistics and increased domestic consumption will pave the way for the industry to
grow further in future. With the promise of steady growth and improvement, the service
oriented logistics industry is ready to expand beyond the horizons in later half of the decade.
Digitization in the logistics sector is currently in a nascent stage with most processes yet to be
automated. The current structure of the logistics sector involves intermediaries, which lead to
leakages in the value chain and hence, higher costs for consumers. Technology is being applied
and implemented in different formats; physical automation for trucking and warehousing;
automated documentation and booking of parcels, online marketplaces for comparing price
and services, etc. All these technological enhancements have provided benefits in the form of
disintermediation of services, cost rationalization and curbing inefficiencies. In the era of
digitalization, the revolution of Industry 4.0 has been considered to be successful in improving
logistics operations and optimizing the value chain. Industry 4.0 is actively adopted by
developed countries to speed up their manufacturing operations and logistical activities. This
revolution is almost touched upon all the industrial verticals for providing business benefits in
developing countries as well. The major developments in Industry 4.0 not only include
automation and integrating supply chains but also emphasize on simultaneous growth by
enhancing social, economic and environmental factors (Zhou et al., 2015; Baget al., 2021). The
term “Industry 4.0” was firstly coined in 2011 at the Hanover Fair. In 2013, the German
government used it for revolutionizing the manufacturing processes by adopting digitalization
and automation (Xuetal., 2018; Baget al., 2021a). The initiative itself proved the importance
and linkage of Industry 4.0 with business operations and technology (Cardin et al., 2018; Kusiak,
2018). McKinsey conducted a survey of 300 manufacturing companies in which around 50% of
companies expressed their readiness for the adoption of Industry 4.0 (Sung, 2018). But still, the
question arises: what can be the possible reasons for the low adoption rate of Industry 4.0 and
what kind of readiness for manpower is required to adopt and implement Industry 4.0
technologies?

In the present study, the main emphasis is on the logistics sector which is labor intensive and
unorganized sector inmost developing countries like India. In India, there is mix blend of small
scale to huge scale logistics companies which creates the difference in level of services
provided, automation acquiredandavailabilityof skilled manpower (GuptaandSingh,2020).
Moreover, lack of infrastructure and rigid government policies also increase the complexities of
Indian logistics sector (Gupta et al., 2018a, b; Chakraborty et al., 2020). In India, the literacy rate
and the education level of man power employed in logistics is extremely low as compared to
globalsupplychaincompanies.Thiscreateshugechallengesinimpartingoftrainings.The availability
of cheap manpower is threat to automation thus, risking the quality of services in developing
countries (Mangla et al., 2018; Waqas et al., 2018). Despite these issues, the automation is the
need of every country for growth and to remain competitive in the world. In the era of e-
commerce, there is need to revive the existing supply chains and adopt Industry 4.0
technologies to serve the global needs consistently. In the Indian logistics sector, the
application of technologies like Global Positioning System (GPS), barcoding, radio-frequency
identification (RFID), cloud computing, big data and augmented reality, etc. in the nascent
stage, and there is a huge need to upgrade the skill set of manpower to handle these
technological challenges (Li et al., 2017; Fatorachian and 2018). Therefore, organizations need
to recognize the benefits of Industry 4.0 and train their manpower to deal with technological
advancements. At the same time, organizations must consider the well-being of their
employees and need to come up with some practical solutions for transforming them digitally
(Nam, 2019). This transformation not only requires the development of technical competencies
but also the development of soft skills in the form of learning, innovation and critical analytical
thinking is essential (Jerman et al., 2020). This requires the focus of the organizations to design
proper trainings to bridge the skill and knowledge gap (Li, 2018). In the past studies,
researchers have majorly emphasized on technical and economic aspects of Industry Revolution
4.0, however the development of human research is not adequately researched, specifically in
Indian context (Koo et al., 2015; Parham and Tamminga, 2018).

Estimated to have a value of over $200 billion, the Indian logistics industry is now looking at a
healthy post-pandemic future. For long, it was deemed to be a labour-heavy industry with
poorly educated truck drivers, subpar infrastructure and consistently plagued by bad condition
of vehicles. However, today the Indian logistics industry is integrated with the most advanced
digital tools and is able to carry out end-to-end online operations. Governmental reforms and
rapid extension of high-speed roads are also steadily bringing down the risks and travel time.
This is heartening because the pandemic impact made all the stakeholders realize the urgent
and widespread need to digitize logistics operations.

Logistics industry in India


 India is one of the fastest growing economies in the world. Increase in the transportation
networks along with the expansion and construction of highways, railways and airports is
transforming India into a global transport hub

 The logistics sector is expected to grow at a compound annual growth rate (CAGR) of 15.5%
between FY2019 and FY2024, according to various market research. India's logistics sector
is estimated to account for about 14.4% of GDP.

 Logistics sector has employed over 20-25 million people across job roles in tier 1, 2 and 3
cities and continues to create job opportunities for the unorganized workforce in India.

Types of logistics service


There are many different types of logistics services available in India. Some of the popular

 logistics services available in India are listed below:

1. Transportation Logistics
2. Warehouse Logistics
3. Distribution Logistics
4. Supply Chain Management
5. Project Logistics
6. Third Party Logistics
Key trends in logistics industry
The logistics sector in India is becoming more demanding because of the following trends that
are happening in the market. The trends are listed as follows:

 RISE OF E-COMMERCE - After the Covid pandemic, E-commerce is booming in India and
this has created an increase in demand for logistics services.

 RISE OF LAST-MILE DELIVERY - Last-mile delivery is becoming increasingly important in


the logistics industry, as companies strive to get orders delivered to customers as
quickly and efficiently as possible.

 GROWTH OF EXPRESS DELIVERY - With customers expecting faster delivery of their


goods, express delivery is another area where the logistics companies are thriving.

 RISE OF REVERSE LOGISTICS - Companies are now more focused on ensuring that
returns are handled efficiently.

Future of logistics business in India

According to India's e-commerce logistics report, in 2021, the size of the Indian logistics market
grew by 4%, and it is expected to grow at a CAGR of 6% approximately from 2022- 27,
generating market revenue of USD 556.97 billion by 2027.

• The logistics sector currently employs more than 22 million people in India and is expected to
add another 1.2 million jobs by 2025.

• With the digitization of the logistics industry, the companies are going to leverage
technologies like artificial intelligence, cloud, automation, robotics, block chain, big data, and
IOT to provide smart and innovative logistics solutions to their customers.

• The introduction of the National Logistics Policy along with the PM Gati Shakti Plan will
transform the logistics infrastructure of the country and will make India the logistics hub of the
world in the coming years.
According to IBEF, the Indian logistics
industry is expected to reach a total
size of 311.8 billion in 2024 from
193.6 billion in 2019

According to Research and Markets,


the Indian logistics industry is
expected to reach a total size of
556.97 billion in 2027 from 410.75
billion in 2022. The expected rate of
CAGR is 6.3%

Literature Review

1) Industry 4.0

Before Industry 4.0 Revolution, the industries have experienced three significant industrial
revolutions worldwide. The First Revolution transformed people’s life drastically through steam
power. During the Second Industrial Revolution, the inventions like electricity and
communication redefined the production processes and speed up the processes by shifting
from traditional to automation. Then, the introduction of information technology brought
drastic changes in the working culture of industries in the Third Industrial Revolution. However,
the Fourth Industrial Revolution is very advanced in terms of technology and can process huge
databases in fractions of seconds with cost efficiency (Prause and Weigand, 2016; Schumacher
et al., 2016; Bag et al., 2021c; Kumar et al., 2021a, b). Many developed countries adopted and
implemented similar technologies but with varied terminologies. According to Prause and
Weigand (2016), Industry 4.0 can be defined as “Combination of cyber-physical systems with
automated systems”. In past studies, researchers have linked the supply chain with emerging
concepts related to Industry 4.0 and circular economy (Mrugalska and Wyrwicka, 2017). The
impact of digitalization on supply chain and logistics practices have been highlighted by Ivanov
et al. (2019). Hofmann and Rusch (2017) explored the huge opportunities of Industry 4.0 on
logistics but the implementation of the same by organizations is a big challenge. Barreto et al.
(2017) analysed the crucial factors that are required by organizations to implement Industry 4.0
effectively in the context of the logistics sector. The integration of Industry 4.0 into supply
chains has a significant impact on the performance of supply chain management and can result
in more transparency among all supply chain partners (Ben-Daya et al., 2019). Digitalization has
transformed the way of interaction among suppliers and customers on a real-time basis (Bag et
al., 2021). Flexible operations, mass customization, lean manufacturing, customized packaging
and just in time is the need of the hour which can only be served to customers with the latest
technologies. In the logistics sector, Industry 4.0 relies on artificial intelligence, blockchains, big
data analytics, cloud computing, Internet of things, additive manufacturing, etc. to name a few
(Fatorachian and Kazemi, 2018; Schumacher et al., 2016).

2) Technologies of Industry 4.0 for application in the logistics sector

The most common technologies under Industry 4.0 and used in the logistics sector are as
follows:

 Big Data Analytics: It analyses the huge datasets extracting from various sources to
interpret reliable and useful information for better decision-making (Pacchini et al.,
2019)

 Internet of Things (IoT) : A technology that connects machines with humans and
machines can be accessed from distant locations in a remote-controlled manner
(Ahuett-Garza and Kurfess, 2018)

 Autonomous Robot : Robots with artificial intelligence that can interact with humans,
understand the commands and can take decisions (Li et al., 2017)

 Cloud Computing : Huge data storage in the external environment and quick access and
retrieval whenever required (Zhong et al., 2017)
 Augmented Reality : Real-life experiences with virtual objects for better future
understanding and decision-making (Vaidya et al., 2018)

 Additive Manufacturing : Customized manufacturing in small batches and cost-effective


(Posada et al., 2015)

Discussion

1) Digitization Evolution in Logistics

In this section, other references have been added, mainly drawn from Google scholar, to enrich
the discussion and confirm the arguments put forward by the authors and researchers.

It is widely recognized that the actual industrial revolution will bring forth opportunities related
to global logistics, such as efficiency, sustainability, or responsiveness to customers With the
digitalization of manufacturing processes, "Logistics 4.0" has been receiving increasing
attention in recent years, especially since the evolution of Logistics' concept is deeply related to
the industrial revolution as described in Table 6, which accentuates the fact that logistics
processes are the central function that plays a crucial role in the digital migration of the
manufacturing sector, and therefore the underlying vision of fourth industrial revolution
Some of the front-end technologies of Industry 4.0, such as Cyber-Physical Systems (CPS) and
Internet of Things, Services, and People, can support the real-time tracking and tracing of
materials from point of origin to the last mile, enabling a better internal and external logistics
management. According to Hofmann and Rüsch (2017), Industry 4.0 presents an opportunity
for more efficient logistics management. The authors pointed out that the connectivity of
products and services through the Internet or other network applications such as blockchain
technology will enable the decentralized control of value chains. These same authors state that
digital connectivity offers the possibility of improving automated production as well the self-
optimized as production of goods and services, including delivery without the presence of the
human agent [40].

Witkowski (2017) emphasizes the importance of loT, especially in the logistics and transport
sector since the integration of the respective solutions provides operational data on location
and status [41].

Barreto (2017) argue that the lot is the solution to challenges of transparency or visibility in
supply chains processes, thus boosting customer satisfaction by reducing costs due to reduced
cycles of logistics processes, joining the famous quote of logistics-the right products at ght time,
in the right place, in right quantity and at the right cost [3]. Liu et al. (2019) suggest another
potential benefit of loT- the real-time activated state detection of logistics vehicles for
improved logistics services, which will enable cost reduction through controlled and optimized
fuel consumption [42]. By starting the shift to Industry 4.0, companies will undertake the
digitization of all their processes, ranging from planning, to supply, to manufacturing, to
delivery, and to return, which will positively impact logistics processes by improving flows,
optimizing work, and reducing lead times.

We can deduce that the Industry 4.0 technologies as shown in Figure 8 support the logistics
paradigm on two fronts: physical operations and resource management.
Artificial Intelligence (AI) and big data analytics play an important role in automating decision-
making processes; they provide a way to support human decisions in data-driven a approach. In
addition, Industrial Internet of Things (IIoT) technologies and smart sensors facilitate product
and material identification processes and improve product tracking throughout the chain. As
for computer systems, they provide real-time access to data and information from multiple
sources; therefore, they allow for production planning in real time and in a reactive manner
[28,43]. Industry 4.0 technologies adopted by logistics operations will enable new features that
facilitate the optimization of resources and energy, such as the constant transparency of the
complete supply chain, for all participants in the process.

Figure 9 depicts the main phases in the evolution of logistics 'concept; the most recent
approach is called Logistics 4.0, which is supposed to increase the efficiency of logistics services,
thus allowing manufacturing companies to shift to the concept of Industry 4.0. Some of the
possible solutions would include support for the planning/scheduling process, warehouse
operation management, the management of the intelligent transport system, and the
management of secure information flows [3]. The figure also reflects the scientific interest of
researchers in relation to the emergence of each new solution related to logistics.

The figure above also reflects the scientific interest of researchers in relation to the emergence
of each new solution related to logistics [23].

Smart Logistics modifies the actual solutions already in operation in classical logistics and brings
out new technologies, some of which are presented in Table 8, such as cyber-physical systems,
which consent to the networking and automation of the transport, the storage system, the
sustainable fulfillment of individualized customer demands without increasing costs, and
decentralized software control among others [47,48,49].
Solutions in logistics 4.0

It is important to note that without technological infrastructure such as loT, CPS, cloud
computing, and big data, it will not be possible to take full advantage of Logistics 4.0 programs.
IoT not only helps improve the aspect of transparency in the supply chain but also supports
certain activities such as packaging and order picking. Scientific publications in the literature
point out that big data technologies can process information with new statistical tools and
manage them in a centralized way via cloud computing and decentralized in autonomous
systems. Human capital/managers are responsible for improving the ability to analyze big data
to make the operational decision-making process more efficient. Big data can add significant
value and bring monetary gains to businesses [50,51].The latest technology to be added in
operations management is the application of blockchain technologies, the latter being used for
processing transactions, which allows one to transform supply chains, providing better visibility,
guaranteeing security and privacy, and contributing to operational improvements [52].
The digitalization phase of traditional logistics solutions makes the logistics system more
efficient and flexible in the face of changes in the market and customer needs.

Digitized internal and external logistics will provide an interconnected system, advanced
information analysis and prediction tools, a smart warehouse, and an intelligent transport
system. Industry 4.0 technologies assimilated into logistics operations will offer better
cooperation between the different actors in the chain, which will minimize energy
consumption, among other benefits.

The application of technologies such as cyber-physical systems and big data within the
framework of Logistics 4.0 for the purpose of production process management can be an ideal
way to improve the efficiency of logistics processes while enabling compliance with the
principles of sustainable development [53].Another component that has shown up recently
with Logistics 4.0 concept is none other than the notion of sustainability, achievable through
the intelligent management of the various active elements of the logistics process (such as the
management of delivery areas, the estimation and monitoring of air pollution, and energy
consumption in shop floors) [54].

2) Past Scenario
The Indian logistics industry has come a long way from being a labour intensive during 60’s to
the present technology oriented system that provides wide range of logistics services. The
concept of 3PL is a recent past culture in India. Traditionally, manufacturing companies in India
managed their own logistics requirements in-house. The country then gradually evolved from
the stage where the Indian organizations outsourced their labour requirement in order to avoid
labour related problems. Subsequently, basic services such as transportation and warehousing
were outsourced to different service providers known as the (Second-Party Logistics) 2PL
service providers. With the increasing demand, the service providers started providing
integrated services together with other value added services, while the organizations focus on
the core competencies and streamline their supply chain.

3) Present Scenario
The present state of Warehousing & Transportation

Warehousing and Transportation are two crucial functions of the logistics sector and pandemics
have impacted both on a large scale. This has created major hurdles and challenges in
forecasting the demand, assigning specific capacity, and allocating products across various
sectors and regions.

When it comes to warehousing then decisions related to inventory management need to be


well planned and sophisticated even on good or normal days. In the present times maintaining
and ordering proper quantities has become more difficult because the conventional estimating
techniques of the process are now proving to be of no use. As even decisions of experienced
buyers of purchasing raw material may turn out to be of less worth in the completely altered
world scenario. Amidst all these major obstacles most of the organizations are mainly working
on trimming their product list to make some space in their warehouses. The situation does vary
as per the essentialness of the product in short, every producer needs to be before time or
have leisure time for when it comes to keeping inventories.

Most organizations have even started questioning the need for large regional warehouses and
are setting up smaller warehouses. What they are missing out though, is a plan for a proper and
scheduled digital transformation of the warehousing process. To minimize human interference
and depend more on the data for forecasting the need in a better and errorless manner is
another factor.

Nation-wide lockdown is one phrase that every Indian looks at or thinks of like bitter medicine
that no one wants to reconsider taking. The transportation sector during the peak stage of the
pandemic and even after the easing of the severity has suffered due to the restricted
movement of goods. As per a report by Bloomberg, truck rentals have increased by 56 to 74
percent mainly due to the reducing number of drivers amidst the pandemic. Due to all these
reasons, the overall sector will need to be open to various options including a complete or
partial digital transformation in transportation and logistics, and act nimbly for the same.

But, before that, we need to understand the major hurdles or bottlenecks in the sector. That
caused major hindrances in the overall business and required digital transformation in the
logistics market in India

3.1) Major Bottlenecks

The logistics sector does have some internal and some external bottlenecks. Internal factors are
the inability of most of the logistics enterprises or sections to use the best of the practices along
with the lack of coordination between warehousing and transportation. The major external
pain points of the sector are an extreme shortage of drivers, the overstrained Indian highways,
and the limited number of transport companies utilizing technology or updating it in time.
Amongst all the hurdles or pain points, the one thing that the organizations or logistic
enterprises can do is a plan for the appropriate amount of digital transformation in the process.
As with proper technological adoption not only the internal process of both the factions of the
logistics process will be streamlined but the coordination between the two will also improve.
The next question now is, whether the digital transformation in logistics in India needs to boost
up in the present scenario and if the answer is yes, then what all steps and tools will be needed
to do so?

3.2) Digitization: the need of the hour in Logistics


The Pandemic has highlighted the flaws of the logistics system in India. To overcome these
flaws as mentioned earlier, digital transformation in the logistics sector is one of the major
steps that the industry needs to consider. This digital transformation in logistics though
incorporated by some major players of the industry, but the number is still very minute. The
pandemic has made it clear that agility and technological refinement should be the prime focus
of the logistics industry not only to be the front runner in the race but also for mere survival in
the overall business scenario.

This is tricky not just for the small players but even for the major players of the logistics sector.
Considering all these pointers the larger and the successful companies in digital transformation
can consider moving forward with advanced technologies like AI, ML, IoT, and others as
solutions, similar to one provided by ESDS Software Solution Ltd. to the present problems. For
example, with the rising importance of data, information and data sharing will have a key role
in streamlining the overall business.
4) Future Scenario

4.1) Digital Technologies & Tools that add value in the overall logistics journey

Various technologies are being used across the world that has aged in years which are
overhauling the logistics sector. The following technologies still are infant when it comes to the
digital transformation in the Indian logistics sector.

 Cloud-Based Solutions brings all the major IT operations on one platform. With options
like ESDS Software Solution Ltd. impaneled cloud services the operations become more
seamless and unified.

 Unified Platforms or logistics eMarketplaces to buy and sell logistics services

 Telematics with live GPS feed to digitally monitor cargo and vehicles.

 Process Automation gives real-time responses to the sudden changes in the logistics
networks due to unforeseen circumstances.

 Live Replanning for complete tracking of supply chains and integrating them in the
organization’s IT system.

 AR Devices for improving pickup rates by integrating data with the customers’ field
vision.

 Mobile Robots in Warehouses for error-free and on-time shipments.

The above digital transformation technologies will not only reduce the costs of logistics but also
enable organizations to provide better services and give more room to other functions.
4.2) The right way forward for digital transformation

Businesses are exploiting the potential of digital technologies as a source of value and
transform logistics processes to a varied extent and in a variety of ways. At the same time, it is
indicated that the implementation of digital technologies requires strategic changes in both the
business model and the operational model of enterprises (Boyes, 2015l Sherman and Chauhan,
2016; Bock, Iansiti and Lakhani, 2017). Logistics management at the organization level includes,
among others, procurement, manufacturing, storage, distribution, transport, green logistics,
and recovery logistics. There are many different technological solutions that are nowadays a
key element of digitization, Cloud data storage, IoT (Internet of Things), robotisation, Artificial
intelligence, simulation with the use of digital twins, Big Data Analytics, mobile technologies
and social media (Ocicka, 2017; Adamczewski, 2018). The majority of the indicated
technological solutions are related to the concept of Industry 4.0, which is a complex process of
organizational and technical changes aimed at creating a smart factory.

There is already a vision for Industry 5.0 - an era of intelligent social factories that will be able
to develop communication with people via corporate social networks. In fact, people will be
asked to collaborate and complement virtual and robotic components of automated production
systems with breakthrough technologies supporting faster and intuitive workflows (Nahavanki,
2019; Salimova, Guskova, Krakovskaya, and Sirota, 2019; Aslam, Aimin, and Rehman, 2020;
Longo, Padovano, and Umbrello, 2020; Frederico, 2021; Vogt, 2021). It should be noted that the
digitization of logistics management in an organization is based on many technological solutions
that already exist. The COVID-19 pandemic has stimulated the digitization of organizational
processes and the transformation of business models in enterprises. In the near future, there
will be a focus on the wider use of artificial intelligence, robotisation, automation, which will
partially or completely replace human work.
Conclusion

In the era of the Industry 4.0 Revolution, logistic sector organizations are trying to digitize
operations for sustainable growth. In this journey, the development of manpower for adopting
practices of digitization plays a crucial role. There is also a need to improve technical
infrastructure for adopting new technology-based systems like drones, augmented and virtual
reality, blockchain technology etc. The ranking of these factors along with their sub-factors by
Fuzzy AHP will help organizations to prioritize these factors and devising a plan of action for
digitization of logistics operations. The Indian logistics sector is already taking some steps
towards Digital Transformation but those have been taken mostly by the big players of the
logistics arena that too by the ones based overseas. Organizations in the IT sector like the ESDS
Software Solution Ltd. are trying hard to provide the best possible support to the supply chain
with the provision of solutions like the eNlight Internet of Things Platform. Along with it, the
relaxation in the regulations by the government of India has further boosted the overall process
of Digital transformation in the logistics sector of the country. As various logistics organizations
are innovating the way of operations by accepting and altering through new technologies, the
possibility of the required Digital Transformation in the logistics sector of India seems to be
visible in the near future.
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