Missing mile in Indian logistics!

Source: http://www.trekearth.com/gallery/Europe/Greece/South_Aegean/Kyklades/Serifos/photo912537.htm

A recent World Bank report stated that India has jumped 19 positions in the Logistics Performance Index (54th place in 2015 to 35 in 2016). The index evaluates countries on parameters like: efficiency of customs and border management clearance, quality of trade and transport infrastructure, ease of arranging competitively priced shipments etc. Though its not a clear indicator of how difficult or easy it is to send products to the hinterland it is a welcome improvement none the less.

A part of this improvement may actually have come from the Indian ecommerce boom. The Indian ecommerce industry with its discounts and flash sales not only introduced Indians to convenient shopping but added a much needed logistics infrastructural layer. Flipkart has its logistics arm — eKart, Amazon’s ATS, Snapdeal’s GoJavas and third party players like Delhivery etc added the last mile logistics layer. It opened markets for sellers and options for buyers. However there is still a missing mile in between and lets discuss that.

There are three ‘miles’ in logistics:

  1. First mile: pick up from dispatch warehouse/packing centre
  2. Line haul or Middle-mile: Intercity shipping (road/rail/air)
  3. Last-mile: Delivery from destination processing centre to the end customer

Most startups that have come up have tried to address the First-mile or the Last-mile problem by building warehouse management software, sorting robots, order management layer and by creating a delivery fleet of thousands of delivery boys. While this has generated a lot of employment and steep salary hikes for delivery boys, the overall efficiency of system is range bound. At the end of the day its a human delivering products and beyond a point technology cannot bring in more efficiency. A delivery boy does around 20–25 deliveries in one run so about 40–50 deliveries per day. Given that it’s still physical delivery and still a human delivering it, the efficiency gains can only come from higher order penetration.

Thus, I believe the next wave of innovation in logistics will come from the middle-mile. Startups such as Rivigo are trying to keep their trucks running 24x7 by rotating drivers, thus reducing lead times. Blackbuck is much like Uber for trucks. Then there are folks aggregating supply for inter-city and intra-city routes. But I think we are still just scratching the surface when it comes to line-haul.

Here’s why technology can add significant value in this space:

1) Fragmented Industry: Trucking is a fragmented industry with lots of small (5–10) truck players who are less reliable and not very professional in their dealings. The layers of middlemen (co-loaders etc) further complicates the matter.

2) No defined turn-around-times (TAT): In the current form there is hardly any tracking of truck once it leaves for its destination. There is no live-tracking, no feedback mechanism other than phone-calls. If the truck breaks down, the driver finds some ‘jugaad’ to get it fixed and underlying understanding is ‘it will reach when it will reach’.

3) Regulations n Paperwork: Hopefully Indian govt will clear GST in this monsoon session but till that happens logistics (road-transport especially) will continue to remain a regulatory nightmare. Different states, different tax structures, myriad of babus to deal with. Having a tech system what generates all paperwork required will probably a great time/money saver.

I believe the delta of efficiency that can be added by technology in this layer is immense and we need more startups willing to get their hands dirty to solve a real problem.

Let me know what you think!

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