Post Date : May 17, 2021
The Indian trucking ecosystem is characterised by a high degree of disorganisation, an abundance of single truck owners, and sluggish technology adoption, all of which have led to fundamental issues around visibility, cost, and transit time adherence. With over 12 million+ trucks in India, and net additions of over 6 lakh trucks in the market annually, this space for long has operated with archaic systems which have contributed to logistics costs accounting for a whopping 14% of India’s GDP. The transportation sector is the backbone of any economy, more so in a large country like India. Log-tech companies are bringing about fundamental digitisation in this space which will go a long way in bringing efficiencies to India’s road logistics as India pushes towards a $5 trillion economy and beyond.
More and more companies are either shifting towards an asset-light model by not investing in trucks but by subcontracting with Log-Tech companies or reducing the number of transport vendors they work with and allocating the loads to Log-Tech companies. Log-tech companies in turn have become an important source of business to the small fleet owners who need to maintain their capacity utilization. The unorganised industry in India was impacted by COVID lockdowns, and while the transportation sector may not have been impacted as much as other industries, the transporters who took 50-100% of the truck cost as loans to buy their trucks were especially under strain to maintain utilization in order to make minimum payments.
The fast paced technological emergence backed by unprecedented digital adoption during the COVID period has gained momentum with enhanced value proposition expected from shippers as well as transporters. While on-demand log-tech platforms were initially solving the problems of empty returns, their value proposition now encompasses a broader suite –
Value to Shippers
- Access to large fleet base
In a traditional model, a shipper (a company that needs trucks) would contract a number of Transport vendors and/or fleet owners who in turn may provide a limited set of trucks. Most large shippers have varying volumes impacted by seasonality, and if a shipper needs a much larger number of trucks for moving their cargo during a peak, it is quite likely their traditional vendors may not have the capacity to cater to this increased demand. This problem is solved by log-tech startups who typically have thousands of trucks registered under their platform. Whether it is 1 truck or 100 trucks, a log-tech company is better prepared to cater to such demand rather than a traditional forwarder. This also holds true for shippers who have a large volume base on a day to day basis and rely on log-tech firms to supply a large number of trucks.
- Optimised Pricing
With high demand during harvest months (February to April) and festival seasons (September to December), the demand for trucks can rise by 30-40 % along with freight fluctuations of 7-20 % in comparison to normal freight rates. By having thousands of trucks on their platform, and via in-depth assessments of cyclical movements in pricing via advanced analytics, log-tech firms are able to offer stable and optimised pricing to shippers thereby offering them more predictability in their transport spend and avoiding sudden price surges.
- Visibility and Data analytics
The transport sector has historically been behind the curve when it comes to Big Data analysis and data driven analysis of transport patterns and spend. Every shipment moved by log-tech firms has a digital trail and when this data is amalgamated over thousands of shipments, deep insights can be ascertained which can have real impact on supply chain decisions. Moreover, the shipments are tracked via a shipment app which the drivers use, or via triangulation whereby the driver can have even a basic phone, and with prior consent his location is tracked via cellular triangulation.
Value to Transporters
- Optimising Loads
An average intercity truck in India plies between 96,000 – 130,000 KMs per annum which involves a substantial amount of time in-between waiting for, and finding loads. Log-tech firms have become a supplementary source of loads, and in many cases, a primary source of loads for many of these transporters.
- Efficient Payments
The transportation industry has traditionally been cash intensive with a lot of delays and inefficiencies in settling payments to transporters. Given that all shipments moved have a digital trail, and that log-tech companies have robust financial integrations and systems, payments are made to transporters digitally and on time. The sector as a whole is being dragged into the digital age slowly but surely.
- Access to data
Similar to shippers, transporters also have access to data on their shipments, routes, spend etc. via easy to use dashboards available on their phones. More than 65% of domestic cargo is moved via trucks. Bringing digitisation to this sector will go a long way in propagating digitization as a whole to the economy. Log tech companies are revolutionizing an archaic industry and bringing order to an otherwise disorganised industry.
This article has been authored by Mudasar Mohamed, CEO and Co-Founder, Ezyhaul – a digital road freight platform.