Sumit Sharma explains why it is necessary to implement new generation technologies in India's logistic industry.
Logistics is the backbone of any economy as it affects all end-user industries in general and is very important for all three sectors of the economy: agriculture, manufacturing and the service industry. The logistics market amounts to 13 per cent of gross domestic product (GDP) and is estimated to be $4 trillion worldwide. The current logistics market in India is about $250 billion.
The Indian market is at its nascent stage; there are only a handful of large organised players in the various segments of logistics. In a $250 billion industry, India do not have even a single player with more than $2 billion revenue, while the country should have at least 10 to 15 players with revenues in excess of $5 billion each. This, in turn, means start-ups are likely to have less resistance from large established traditional players and have tremendous scope for growth in the existing market itself.
In developing countries like India, the development in logistics is quite different from that of other countries. Technological innovations and advancements currently govern selection of supply chain partners and coordination and monitoring of end-to-end process delivery. Technology has brought several innovations into logistics. There are several recent technologies such as the Internet of Things, mobile, augmented reality, social media, cloud storage, big data analytics and computing, which improve the efficiency of logistics operations.
Relevant changes in technology that are being fast adopted by the new generation logistics companies have helped in transforming them for the better through electronic means like collecting, moving, and storing and analysing data, information and knowledge. Technology has also helped them develop competitive edge and deliver customer-configured products and value-added services faster than competition with greater ability.
In India, most of the start-up action has been in the long haul freight segment. Start-ups aim at establishing faster transactions, better truck utilisation, providing supply chain visibility to customers and vendors, enabling efficient spot pricing, standardising service levels and avoiding agent intermediation.
Ever-increasing internet and mobile penetration in India has meant that businesses can continuously leverage technologies to capture new demand and supply and build a highly-scalable network. Start-ups are also deploying innovations like sensor technology, but there is a need for focused plan for skill development in the wider Indian logistics landscape. Companies are focusing on moving towards reducing cycle times internally, in order to add value to their customers.
More than 75 per cent of the trucking industry is unorganised and saddled with inefficiencies like lack of visibility of return load, multi-level intermediaries and low quality of information flow leading to trucks running less than 5,000 billable kilometres per month (apart from non-billable or dry-runs, where trucks move from point A to B without cargo) and having only 14 to 15 days of actual run in a month while waiting for cargo on other days. This can change and is changing with technology-enabled logistics -visibility of return load, incentive structure for drivers and quality systems to root out inefficiencies.
It is already bearing fruits and trucks have started running billable kilometres in excess of 10,000 km/month.
The addressable market for a tech logistic company is $40 billion. India needs more than 10 companies to scale up to more than $1 billion in revenue in this space (inter-city full truck load) to make its logistics industry efficient. Tech logistic start-ups like GoBOLT have placed emphasis on the following elements to deliver value to their clients and stakeholders:
Unique hybrid operating model: It is an innovative model involving a combination of owned, dedicated and marketplace fleet for control over operations, balanced capital deployment and risk management.
Scalable technology platform: GoBOLT has developed a versatile technology platform called 'Launchpad' to deliver scalability, efficiency and robustness. It aids in automated vehicle selection, improving asset utilisation, route optimisation and fuel cost saving among others.
Focus on operational efficiencies: Strong operational involvement and technology-enablement leads to faster TAT, higher asset utilisation and increasing share of wallet.
Ability to grow profitably: Business model is aimed at reducing cost per kilometre and achieving higher operating leverage. The results currently show profit for most customer engagements.
Strong professional management team: Tech-savvy management team - with experience of holding leadership roles in large MNCs - adapting to the changing needs of the industry.
eCommerce continues to drive the need for high industry growth. Implementation of GST encourages building of an organised logistics industry and also improves the cost structure for the industry. Due to these advancements, private equity (PE) investments are seen in this sector. Recent examples such as Warburg's investment in Rivigo and Carlyle & Fosun's investment in Delhivery, show growth of foreign capital recognising the need and potential of this sector in India. It is expected that in 18 months or so, these companies may start getting endorsed by large public market investors also, as they get on to the initial public offer (IPO) bandwagon. It is of interest to note that many traditional logistic players took decades to reach a turnover of over Rs 800 crore, which some of the start-ups have achieved in three to five years' time. Industry experts suggest that some of these may scale up to Rs 6,000 crore or more in the next two or three years.
Presently, some of the perceivable changes the new generation tech logistics companies are bringing in in this sector are:
Monitoring vehicles and each of the processes: With the help of technology, accurate monitoring of vehicles would become possible. One can send proper updates to customers alongside the estimated time of the vehicle reaching the destination. Ensuring Timely delivery: In India, online retailing is making a big wave with the presence of e-commerce giants like Flipkart, Amazon, EBay, Shopclues, Myntra and Homeshop18 which hire third party, professionally-managed logistic companies to ensure timely delivery for their customers. This is beneficial for both the companies, because while the e-commerce giants strengthen their goodwill with their customers, the logistics companies spread their market segment.
Drivers' ecosystem getting changed: The quality of life of truck drivers is getting better because there is a fixed rotational shift allocated to every driver. They sport uniforms with the logo of their company printed on it, and have GPS trackers in their vehicles that help them reach their destination without any problem. Also, because of proper segmentation, trucks are not heavily loaded. Hubs have been created for drivers to provide them with proper shelter, food and place to rest after driving for a span of eight hours. While another driver will continue the journey, everyone has to maintain a uniform time for covering a particular distance so that the goods reach the destination in time. The company will monitor the activities simultaneously.
Trucks are well-maintained and have modern facilities which enable the drivers to avoid exhaustion and pilferage or spoiling of the goods to be delivered.
The author is co-founder of GoBOLT, one of the tech-logistics companies based out of New Delhi.