Disclaimer: All the views expressed in this article are of the author’s own and do not necessarily represent the views of Logistics Insider.
Delhivery acquiring Spoton has been a topic of interest for many B2B express logistics enthusiasts. The acquisition was a buzz for the last few months and was in line with the industry expectation about the consolidation of B2B & B2C logistics services. On the other hand, the investor community looked at it positively, as it was supposed to unlock value through the pooling of resources and extract potential for integrated logistics services.
The acquisition took place in FY 21-22 while the merger of operational activities was expected in early FY 22-23, which went as per plan. Industry experts envisaged a few teething problems in the merger of operations of both the companies because of volumes, common customers and differences in management styles. Considering the strengths and past performance of both the companies, it was not considered a major challenge for Delhivery or Spoton. Historically, Spoton has been a well-managed organization in terms of operational processes and efficiency, while Delhivery has been considered a company with a quick response to challenges and a fast pace of growth.
In the last few days, we have heard about significant service failures in B2B express space from customers of both these companies. These service failures started post-operational activities merger of both entities and soon enough became a major challenge. Prior to the operational activity merger, Delhivery and Spoton were managing separate channels for handling shipments. As per the available information, the problem started when Delhivery decided to handle all first mile, middle mile and last mile operations from a single channel on a defined cutoff date and in order to manage complete volume under one channel, IT systems were migrated to a single platform. This led to the increase in Delhivery’s B2B volumes to 2.5 times the pre-merger level. As per sources, the non-alignment of first and last-mile partners of Spoton with the new channel added fuel to service failures.
Although before the operational merger, multiple joint studies about processes had taken place for a smooth transition, it seems there were some major gaps in planning or execution. These gaps may be in capability estimation, infrastructure estimation, tech compatibility estimation, process transition estimation, communication or something else. As per a quote by pop singer Taylor Swift: “Just because you made a good plan, doesn’t mean that’s what’s gonna happen.”
In the last week, all major competitors in the B2B express domain have reported an increase in volume and most of this incremental volume is expected due to diversion of load. On the other hand, the team of Delhivery-Spoton is struggling with service recovery.
In due course of time, Delhivery will be able to put the house in order but till then, such an operational failure may cause significant damage to the customer base of Spoton. It is also going to cause a dent in the brand value of Delhivery in B2B express space for the short to mid-term. This is definitely not something desirable for an organisation that is planning for a big bang IPO.
This article has been authored by Vikash Khatri, Founder, Aviral Consulting. He can be reached at firstname.lastname@example.org.