Post Date : August 18, 2020
Our nation has 90 lakh trucks that carry freight worth over USD 150 billion annually. It provides direct employment to 20 crore people. In other words, close to 1 in every 100 Indians is associated with the trucking business. These gallant people assure continuity of FOL supply in the icy outposts of Ladakh, continuity of water supply in the arid areas of Maharashtra and cement bags in the infrastructure project site-locations. They drive through rain and shine to ensure that groceries reach our markets on time and make sure that inputs reach factories on time.
Many of us have faced stock-outs in the shops during this lockdown and must have desperately prayed for the laden trucks to arrive at our respite. Such is their hold on our lives because last-mile delivery cannot happen without trucks.
Last-mile delivery costs account to close to 30% of total shipment costs in India. And, a fair amount of it can be reduced. Assuming that 12% of a commodity’s cost is its logistics cost, and, we manage to shrink this by 2%, the cost of the commodity can reduce by 2%. Extended to the entire country’s produce and our entire nation’s last-mile delivery system, this cost-reduction could increase demand for products by 2% and our GDP could increase by 2%. Although wishful and exaggerated, this is the promise last-mile delivery holds.
The success of our Make in India initiative rests on our truckers’ ability to deliver on their promises – both implicit as well as explicit. But, what about the promises we made to our truckers? Implicit as well as explicit!
How many research articles have been published on trucker’s work-life balance? How many truck drivers and cleaners are medically covered? How many truck drivers work no more than 9 hours per day? How many truck-drivers enjoy work-life balance?
Close to 92% of the trucks plying in our country are controlled by unorganized players. How many policy guidelines have been pushed to bring them into the organized fold, so that they get better wages and service conditions? The market is rife with players who undercut one another to operate trucks. How many of us have got down together to address truck-availability issues at a national level? The COVID epidemic has exposed the evils of spot-markets and the damage they cause to businesses. How many of us have found time to discuss and debate this issue?
Availability of drivers per 1000 trucks was 900 in 2002, 650 in 2019 and less than 300 now, post-COVID. Drivers refuse to expose themselves to the virus and do not enjoy the prospects of staying put in over-crowded truck-parking bays. They are reluctant to bathe in dirty public toilets and are rightfully demanding better hygienic working conditions.
Let us go back to logistics cost and understand how it can broadly be decomposed:
- Transportation costs which include the cost of diesel and toll fees, if any.
- Overhead costs which include vehicle repair, administration costs, driver salary etc.
- Inventory costs which include the cost of material pilferage, cost of damages etc.
While most process improvement novices would love to train their scissors on the fuel expenses, they do not because a vehicle’s fuel consumption hinges on many factors. So, they go for the easiest. They do whatever can trim down a driver’s salary and the overheads. Essentially, they encourage the cutting of the proverbial corners. That’s the reason we see underpaid drivers spending over 12 hours on wheels, overloading of trucks, under-maintenance of trucks, and the like.
As long as the parcel reaches our houses, we don’t really care who is getting them and what problems they face. But, now, truck-drivers are competing with bees and also disappearing like them. We must therefore wake up. The organized as well as the unorganized truck operators have a common problem – driver availability. Providing drivers the needed facilities is long overdue and we simply cannot wish they deliver consignments at great peril to their lives, without adequate compensation.
A lot has been envisioned in the National Logistics Policy and it is time we mould those thoughts into systems and implement each one of them.
We must also borrow a leaf or two from the Marine Freight Forwarders. We need men like Malcolm McLean to introduce a revolutionary improvement or two to change our fate. Pray, what could they be?
Some would bat for truck containerization; others would pitch for sophisticated financial tools to manage cash-flows, while others would demand systemic infrastructural improvements. How about all of these and maybe more?
Indians lose close to 40% of our annual agricultural produce to damage. Less than 5% of our agricultural produce moves through structured cold-chain logistics channels. We must improve on this score and introduce specialized reefer trucks. These reefer trucks can also help boost our vaccine penetration levels and save about 20 lakh people from vaccine-preventable deaths. But, what about their empty haulage costs? We shall drop a proposal in a while.
Properly developed containerisation systems or palletisation systems will not only reduce volumetric over-loading but will also improve cargo security and provide us with new oil-data! Data-analysis can go a long way in optimising transport networks and driving down costs. Besides, structured containerisation will also make automatic loading and unloading operations easy which will reduce truck-holding times; reducing demurrage related disputes and problems associated with unionised manual-material handling operations at various ports and warehouses that add costs. It is estimated that transporters cough up something close to INR 1,500 per truck for loading operations- typically increasing costs of transportation by INR 0.15 per ton per kilometre. Annually translated for the entire country, this amount is about INR 56,000 crores or USD 8 Billion.
Containerisation can come to our rescue as it would boost efficiency of loading and unloading. It may also make 3PL operations and automation efforts more feasible and thereby improve vehicle utilisation rates.
Nearly 92% of our truckers are small-fleet owners and unorganized players. Revenue of about INR 3 per kilometre is set aside by Small freight owners to service their vehicle loans. That is roughly INR 1 Lakh per truck per year. Given that we have 90 lakh trucks of which about 10% maybe hypothecated to some bank, it is estimated that the microfinance market for truck-loan servicing is valued at INR 750 crore.
Inability to find adequate parking and unloading spots in Urban India creates serious logistical challenges while at the same time, bringing disrepute to the truck-drivers for no fault of theirs. Addressing this problem in the planning stage itself, will result in revenue creation as was done in the United States, by way of levying peak hour transit fees and the like. While this may seem to increase transportation costs, it will actually drive down the costs because accidents will decrease, reducing maintenance and insurance costs, and, the revenue generated from the toll maybe used to create enabling infrastructure to improve driver availability, improving truck-availability and therefore, resulting in a dip in prices.
These are proposals that demand action from everybody save the transporters. What can they do to come out of the quagmire?
Our transporters may do well to learn from Japanese businessmen. If they want an Indian example, they make look at the Dabbawalas of Mumbai.
Japanese businessmen evolved a model called Keiretsu that is in essence a relationship-driven, collaborative arrangement between various stakeholders. Japanese business houses like Mitsubishi group form part of a dominant Keiretsu, which involve banks, networks of different companies where each firm complements the other, with an overall goal of improving the distribution system of the group. Banks provide needed financial muscle whereas the manufacturing companies supply with the finished goods at the required time.
Our Dabbawalas of Mumbai have evolved a brotherhood that helps them deliver food to their customers using Mumbai’s local transport network, breaking Six Sigma records of MNCs. They rely on innovative use of codes and other trade-craft perfected by class 8 dropouts, many of whom don’t know to operate a smartphone. Their financial muscle is robust enough to see them through this lockdown. And, their food-delivery charges are so cheap that they have no competition.
The secret that ties Mitsubishi Motors to its Keiretsu and Dabbawalas to their association is age-old. It is collaborative synergy and trust at play. How do we improve this in among our trucking fraternity and what benefits does such a synergy hold?
Political instability, the decline in manufacturing, shortage of labour, the overall decline in output and consumption are having a telling impact on the Transport sector at present. With only 50% of industries that too at 30% capacity, freight levels and vehicle demand have both plummeted by 85%. Adding to this is the absence of drivers, helpers and loaders. Our trucks steer the economy of our nation and we must set in place a system that maintains this economic vehicle. Because the industry is predominantly cash-driven and advance amounts are huge, there are bound to be a lot of oral agreements that could lead into disputes of some form. There is no institutionalized mediation process that unorganized truckers can take advantage of, and, this adds to the pile-up of NPAs in this sector.
So, how do we proceed?
We can evolve a Keiretsu with a lead banker at the centre, Commercial vehicle manufacturers at the core along with government bodies like RTO, Competition Commission of India and the like. This main body must encourage all transporters to join the keiretsu to evolve a truck community system akin to the port community system that is operational at our ports. Sharing real-time information and GPS locations of trucks will not only increase security but will also reduce empty haulage by possibly improving 3PL uptake, reduce overheads, boost automation, reduce agricultural output losses, improve vaccine penetration, lend an air of formality to the trucking community creating improved work-conditions, provide a potential to reap the advantages of economies of scale and drive down transportation costs.
This article has been authored by Chirag Katira, Director, Shree Nashik Goods Transport Co. Pvt. Ltd. and Project Head for COVID-19 at All India Motor Transport Congress.