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Current truck scene of India is no different from that of developed countries like the US or Japan had few decades back. Informational asymmetries have done wonders for those markets. While the intelligent transport structure were encouraged by the government in developed markets, in India it is more of private initiatives but it derives similar results of providing trucking companies and shippers with information on cargo awaiting trucks and vice versa.
There are few companies that have pioneered the way IT is used to touch every day life and the evolution of trade and commerce around it. Who would disagree with the convenience that web-based taxi aggregators have brought in for mobility and then there are companies who used it on a bigger scale to aggregate buses, and a similar approach is fast catching up and being replicated to other transport sector. Years ago airlines across the globe had started code sharing model to maximize seat occupancy and leverage from network of partner airline. It has worked for many airlines, marred by competition and rising operation cost, and made them profitable.A similar transformation is slowly taking off in the segment of freight movement by road.
Stellar growth of road transport
Golden Quadrilateral project initiated a change to the entire dynamics of road transport in the country. And since then things have bettered and now with availability of higher capacity trucks, road transport sector is giving stiff competition to rail both on the fronts of cost and time efficiency. Drop in crude oil prices and a deregulated oil price regime have further cemented the road transport industry and Indian rail is already feeling the heat. Moreover, low volume shippers also prefer road transport for convenience.
the trucking sector, and in the container segment also Concor is already under pressure to cut freight rates. Trucking industry which for ages operated on non-tech and non-innovative business model has a number of inherent issues that still makes them inefficient and leads to vehicle idling time much higher than average industry standard in other major economies. Traditionally, the trucking industry in India is more controlled through human intervention and an array of middle men involved in the process of truck booking not only add to the transport cost but it also eliminates any chances of reformation in the industry. The shipper doesn’t complain as even his LCL cargo also gets a space for transit and transporters don’t rue as they are assured of higher capacity utilization of their vehicles. But this business model is slowly moving to the web space. Presenting a strong case for road transport sector, Raghav Himatsingka, Founder & CEO, Truckola said, “With the number of manufacturers increasing, however, the cargo load became fragmented and thus, road transportation gained prominence. Even after the completion of the Dedicated Freight Corridor Project in 2019, road transportation will witness a significant rise. The extra costs of loading and unloading the cargo twice, known as handling costs, and the impossibility of providing door-todoor service via rail makes road the best option available. With 60-65 per cent increase in road construction in the next 5 years, implementation of the impending Goods and Services Tax and the drastic improvement in technology that facilitates tracking of vehicles, informatory messages at regular intervals and better quality of vehicles, India’s logistics industry is set to grow twice as fast as its GDP.”
Informational asymmetries
About 90 per cent of the trucking industry consists of entities that have less than five trucks, but contributing 80 per cent of gross revenue. The remaining 10 per cent of companies comprises the organised sector. As a result, the industry is essentially controlled by intermediaries, because a large number of truck owners themselves are too small as firms to acquire critical market information. Hence, web and app based business model have shown the way for aggregating vehicles on real time and put them to use based on available cargo. These technology platforms act as marketplace, similar to a stock exchange or a commodity exchange, to bring together customers and transport vendors.
Notably, current truck scene of India is no different from that of developed countries like the US or Japan had few decades back. Informational asymmetries have done wonders for those markets. While the intelligent transport structure were encouraged by the government in developed markets, in India it is more of private initiatives but it derives similar results of providing trucking companies and shippers with information on cargo awaiting trucks and vice versa.
Companies like Truckola and Blackbuck offer inter-state transport service while companies like LetsTransport and ThePorter offer intra-city cargo movement. Then there are hyper local service providers like Grab which provide last mile connectivity from e-commerce companies to neighborhood store to deliver goods. More importantly, being asset light helps these techenabled e-logistics companies to scale up faster than traditional operators. For example, Truckola a techenabled intercity and interstate FTL transportation service provider that started operation in December, 2015 has currently aggregated nearly 50,000 trucks whereas one of the major organised transporters, VRL Logistics which is in operation since 1976, has a fleet of only 3,872 trucks. Moreover, in order to gain on economies of scale and to remain focused on the core business, many business houses are outsourcing their order management, logistics and fulfillment services to 3PL partners.
Grab, a company which banks on crowd-sourced logistics movement where two-wheeler riders complete the job of last mile delivery of goods, the company has contracts with the likes of McDonalds, Reliance Jio, Amazon and Myntra to generate cargo volume. Explaining the reason for clients outsourcing the last mile cargo delivery job to a specialist, Pratish Sanghvi, Cofounder & Director, Grab said that every sector has its own strengths and if companies start investing on logistics infrastructure then the cost of logistics will be higher. Hence they rely on last mile logistics service providers so that they can focus on their core business. The last mile connectivity is the most essential and pain point for any business. While companies like Ecom Express and Delhivery who are strong at first mile and long haul cargo movement, but last mile cargo delivery is a challenge for them as well. That’s the reason even e-commerce logistics companies outsource the last mile service.
Sanghvi stresses that wage of workers has increased in the last couple of years, hence a collaborative model works for all. Rising cost for self management of logistics has forced companies to relook at outsourcing model. That is the reason why the company has registered an average monthly growth of 15-20 per cent.
ReturnTrucks also works as a single point of contact between load owners, truck operators and agents thereby reducing lot of gaps, delays and costs on communication.
Sudhakar Vintha, CEO, ReturnTrucks stressing on the need for change said, that truckers will be more reliant on tech market places like Return Trucks for their business in the coming year and customers will be reaching out to larger number of service providers to get the best rate for their requirement. Tech adoption will further speed up invoicing and payment processes reducing financial burden for truckers. There is lot of scope for tech based startups to disrupt the market by aggregating the suppliers and improving their asset utilization as the largest players in this industry hold less than 2 per cent market share. Benefits of using online fleet aggregator platforms such as savings in terms of time and fuel attracts fleet owners. Traditionally, commercial fleet owners used to depend on their existing customer base for revenue but web-based fleet aggregators turn out beneficial to transport companies as they can further increase their revenue in terms of getting more orders.
One major challenge for e-logistic companies is to convince the trade which is averse to change from traditional mode of operation to a tech-enabled business model. Speaking on the acceptability of technology Dhruvil Sanghvi, CEO, LogiNext, says, “Once the target audience is educated enough to accept technology as a benefactor, then the industry would evolve at a much higher pace.”
Adding more value per Rupee
An estimated 5,00,000 commercial vehicles are being added every year, resulting in an annual requirement of the same number of commercial vehicle drivers. The transformation of the industry is, however, dependent on the transformation of the skill sets possessed by the current corps of freight transport professionals. By year 2020, there is likely to be requirement for over 5 million drivers and 1 lakh warehouse managers, hence a top down approach to serve all stake holders will be needed which may not be fulfilled without information management on real time.
Explaining the greater need for use of technology, Anjani Mandal, Co-founder and CEO, 4TiGO claims their platform is more of a fleet exchange with associated business services to facilitate the entire eco-system around logistics industry. While traditional transport companies have been using technology of some sort but on the ground the services are not technology-enabled. There is a need for integrated approach to the entire eco-system of logistics. “When there is higher amount of value addition to the platform it allows a sustainable business model. We ensure value proposition for all stakeholder in the ecosystem. For example, even the driver has the incentive of many supports like roadside assistance throughout the transit to tackle any eventuality,” said Anjani Mandal. The company has integrated the oil marketing companies and banks onto the platform and as a result transporters attached to 4TiGO even have access to working capital.
Locus, which provides logistic automation platform to companies to bring efficiency into operation is getting enquiries from both new age and traditional transport companies to use its technology to plan better in terms of load and route management. Earlier companies which used to spend hours before preparing a shipment for dispatch are now able to release consignments within minutes. Many times companies shy away to shift from manual mode to ITenabled operation largely due to cost factor. Considering need of SMEs, companies like Locus have come up with innovative revenue model where the company instead of a licensing fee, charges its clients based on the number of transactions. The saving made by companies due to the use of tech-enabled logistic solutions varies from industry to industry. For example an online furniture and household goods company has improved its efficiency by 25 per cent, similarly online grocery retailers have become 15 per cent more productive, intracity delivery companies have bettered service delivery by 100 per cent, an online medicine store has made a saving in fuel cost by about 25 per cent.
Rise of E-logistics start-ups There were about 42 start-ups who had entered into e-logistics but currently about only handful of them are growing. Start-ups in e-logistics scene are largely divided into segments based on their clientele base: 1) Serving enterprises 2) Small & Medium Enterprises and operating in three segments which are intercity service, intra-city delivery and last mile delivery. These companies are focusing on service quality and value addition to differentiate. Anjani Mandal, Co-founder and CEO, 4TiGO claims their platform is more of a fleet exchange with associated business services to facilitate the entire eco-system around logistics industry. While traditional transport companies have been using technology of some sort but on the ground the services are not technology-enabled. “Our platform is more of a freight exchange where supply and demand requirements are fulfilled. Many existing transport companies reach out to us to become tech-enabled to compete in the market.” Moreover, the platform is fully integrated with the expense elements such as fuel, toll, and driver remittance and the entire system is fully integrated to the banking network to ensure online payment.
4TiGO operates in the space of intercity industrial goods movement. The company works on optimum utilization and deployment of assets to improve customer service till the last mile to the receiver of the cargo. The receiver or the end client at his end can measure the service quality in terms of receipt of all documents, consignment and proof of delivery which helps him to reduce working capital cycle.
On the other hand, the trucker after delivery of the consignment also gets a return cargo. The company is hopeful that by September onwards it will add about 1,000 trucks per month.
Similarly, explaining how LetsTransport is helping companies, Pushkar Singh, CEO & Co-founder, LetsTransport said that usually companies maintain an excess stock of goods to meet their peak demand. While some FMCG companies have a peak demand on a week day, few other might have high orders on a week end. Hence, LetsTransport keeps leveraging on various demand cycle of clients from different segments. More than 75 per cent of fleet registered with LetsTransport serve exclusively to the company and remaining fleet owners keep shifting. On any given day, if a cargo owner requires 500 trucks, given the fragmented nature of the logistics industry, he had to contact several transporters or brokers to meet his requirement while the demand of 500 trucks is just about 10 per cent of the fleet size for a fleet aggregator like LetsTransport.
But how much traction these online fleet aggregators have when the competition is mounting and Pushkar Singh of LetsTransport highlights that in their case, the company has some of the top ten logistic companies who rely on them for fleet. Moreover, FMCG majors like Coca Cola, Bisleri and Big Bazaar including Future Chain are also their clients.
The traditional trucking sector is feeling the pinch of mounting competition. For example, a major listed transport company Coastal Roadways during FY2015-16 witnessed a fall of about 6 per cent in its turnover, and the company among other reasons, found the domestic truck freight market has become highly competitive with entry of truckaggregators and start-up companies backed with huge foreign investments and high end technology platforms.
The traditional trucking sector is feeling the pinch of mounting competition. For example, a major listed transport company Coastal Roadways during FY2015-16 witnessed a fall of about 6 per cent in its turnover, and the company among other reasons, found the domestic truck freight market has become highly competitive with entry of truckaggregators and start-up companies backed with huge foreign investments and high end technology platforms.
Moreover, the vehicle aggregator model is a step towards big data analytics which further strengthens the value offered by transport industry. Entry of technology companies help in effective fleet management, price comparison, scheduling and tracking of vehicles, and availability of critical data for analysis. Additionally, over a period of time, the fleet aggregator data can be used by companies looking for launching a product or service for a specific region.
Embracing the change
The next phase of growth and product innovation in the logistics industry has just begun. Indian companies that offer tech solutions to Indian and overseas logistics firms are hopeful to track transport movement beyond the boundaries of India. The logistics sector is going to be optimized and the system of a warehouse manager will not just intimate about a logjam in transit but will also offer alternate escape route options.
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