Demystifying the opportunities in Long Haul Logistics

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With India taking giant strides in express industry, road transport remains the most instrumental and sought after mode of transport for moving the goods to their ultimate destination. Conjecturing the imminent infrastructural developments in roads and national highways, it’s time for the trucking industry to contemplate on restructuring and be ready for the biggest opportunities in the making.

                                                                                                                                                       Saurabh Sharma

Of all modes of transportation reeling under mushrooming E-commerce and retail sector, road transport is encumbered the most, as a substantial amount of cargo movement within the territory relies on large number of long haul trucks plying on the roads. Burden is added with the increasing demand for ultra swift delivery options provided by many e-tailers. Trucks are scaling more distances than ever after the implementation of GST regime which led to the dismantling of interstate border check-posts to some extent. According to the data collated by the Ministry of Road Transport & Highways, trucks are travelling 300-325 km a day, an up to 44 per cent increase from the average of 225 km a day before July 1 2017, when the GST was introduced.

Challenges in intercity trucking

Variety of cargo is being transported by the long haul trucks like agricultural produce, food items, durables and even hazmat. As road transportation is exposed to so many risks and inconsistencies which may lead to inordinate delays in delivery, it demands robust pre-emptive measures and network optimisation in order to be efficient and cost effective. With above, being an unorganised business, challenges are a never ending situation for India’s trucking sector.

Working capital has been a gross challenge in intercity logistics which make way for the intermediaries to come into the picture. Mahendra K Shah, MD & CEO, V Trans (India) Ltd says, “Working capital is one of the intricacies in transport business which needs to be managed prudently. The credit demand of client usually hovers around 70 – 80 days, which is much higher in comparison to developed western countries. In addition, the invoice processing and generating the physical proof of delivery (POD) takes substantial time to submit the invoice.”

What makes the system more economically inefficient is that this upfront capital cost is currently being borne by the brokers or transporters whose cost of capital, as we argue, is much more (anywhere between 4 to 10 per cent points higher) than if the same was taken by a corporate or a large shipper.

“Most trucking companies have cash flow challenges when customers delay payments for wide variety of operational reasons or their own business challenges. Sometimes, confusing profit on the books with cash in the bank also leads to insufficiency of funds to sustain ongoing operations. High interest costs as well as inconsistent debt servicing also add to the problem. To be effective, higher asset utilisation, tight control over costs and greater fiscal discipline is needed,” explains Uday R Sharma, Director- Sales, Spoton Logistics.

Working capital can be broken down into two parts – unorganised lending, which leads to higher than usual cost of capital; and cash requirement for organised individual trips. Digital/financial technology solutions can help address both issues and there are some start-ups that are now trying to address this concern. Deploying captive treasury balance for bill discounting, FASTag payment rollout across highway tolls and freight platforms that cover working capital requirements, are some of the recent attempts to solve this issue.

Besides, there are other issues which need to be tackled in the long haul transportation. Some of them are listed below:

Vehicle selection and utilisation: Companies usually don’t spend time in evaluating what all types of (tonnages) trucks are needed for their dispatches.

Transportation Cost:  Fewer efforts are taken to evaluate if cost provided by the transporter are realistic or not.

Shortage of drivers:  A lot of menial work takes its toll on number of driver choosing the profession.

Lack of Cold Chain Infrastructure:  Scarcity of temperature control reefer trucks.

Another critical issue is the lack of awareness among transporters and truckers. There are so many significant areas where the transporter and truckers should be educated. Many transporters don’t even know how to calculate operating cost. They are still following traditional theory of working at an operating cost, a bit lower than their nearby competitor. All this leads to reduction in profits of transporters and huge loss to the truckers as they do not acquire the freight rate that equals to actual cost they have spent. 

Moreover, the number of Heavy Commercial Vehicles (HCVs) plying on the highways is insignificant largely due to (below-par) road infrastructure. A 16 tonner is considered a heavy-duty truck in India unlike 40T in advanced countries. But things might improve as there is an enhanced focus on infrastructure development of the present government.

Incentivising the truckers

A transport company is represented by the truck driver and the place of operation by security guards and sometimes some other staff members associated with the logistics department. Given the vast and unfavourable dynamics of road transportation in India, drivers are bound to face the pangs of the profession. The arduous nature of this profession results in the paucity of drivers as they are willing to take other professions. It’s of utmost importance to facilitate them with the required provisions in order to put their work at ease.

Discussing the plight of truck drivers, Mahendra Arya, President, All India Transporters Welfare Association (AITWA) says, ”Truck driver is the interface between a customer and a transporter at the site of goods transaction or loading and unloading site, into or from a truck. The place can be a manufacturing plant, warehouse or a project site in general.  When a truck driver, after a rough journey of several days on highways reaches his destination along with his customer’s load, the first thing he wants to do is take the load off his truck; may be followed by a small nap, until he gets his next order from his truck’s owner. But, in reality, it does not happen that way; almost at 80 per cent locations.”

“Trucking industry has multiple actors,” says Prof G Raghuram, Director, IIM Bangalore. The core actors directly serving the customers are the trucking company and the brokers/agents. They are supported by the pure truck owners. This core set of actors is supported by four entities providing the tangible elements for trucking: manufacturers, truck body builders, drivers and fuel suppliers. The core set of actors has an ecosystem constituting support services, and government and regulatory body.

Raghuram adds, “Truck drivers are the most critical players, forming the human backbone of this industry. In India, the role of a truck driver is challenging, given the unpredictable nature and schedule, long periods and distances away from family members, perceived harassment by the police while en route, and the job insecurity involved. In spite of this, they are paid poorly and not surprisingly there is a growing shortage of drivers, globally. There is both a status and a skill gap among drivers. Many actors in this sector have begun to realise this. Therefore, today, there is an increasing focus on bridging the skill gap and providing appropriate en route facilities for drivers.”

Arya continues, “The daily routine of handling arrivals and the process of receiving consignments hardens people who are at the job. They are in no position to step into the shoes of the driver and try to feel his misery.”

“This realisation is the whole basis of our thought process in the third dimension of our project ‘Highway Heroes’,” says Arya.

Combating the deficiencies in Network Optimisation

Though road transportation is marred by inadequacies, they can be overcome by the optimum use of technology and available resources.

Pointing the inevitability of obtaining reliable data, when trucks are on the move, Rohan Mittal, Vice President- Strategy and Marketing, Allcargo Logistics explains, “Any supply chain optimisation requires authentic data to be captured from ground operations. This in itself has been a problem for most small to mid-size trucking companies due to the low priority accorded to technology adoption. New age trucking companies have started with a firm focus on capturing this data and are therefore able to run network optimisation tools.”

Seeing the current state of trucking industry in India, there is enormous scope of making it a technically viable and in to an organised business. Businesses often struggle with visualising where everyone is located in their list. At times, simply looking at a spreadsheet or Customer Relationship Management (CRM) doesn’t give the exact picture of the geographical locations of the clients or customers. Route optimisation is the method of using technology and computers to figure out the most direct and the efficient route to all the stops and destinations. It helps optimise time and energy for each trip from one location to another. Besides, route optimisation tools can be used to tactically decide changes/ modifications in case of contingencies.

Collaboration between the owners and service providers is imperative to run an economically viable transportation business. Mittal enlists various ways in which it can be made cost-effective:

  • Collaboration between the service providers can bring greater efficiency and load utilisation capacities which in turn will increase profitability and divided the capital infusion.
  • Reduction in the cycle of working capital deployed is positively affected by government initiatives such as GST and E-way bill, saving substantial time on check posts, toll booths, etc.
  • Further integration with in-house Enterprise Resource Planning (ERP) softwares and facilities like ePoD, can get the cycle shorter.
  • Credit ratings of clients, sector-specific credit model can help in higher realisation and exploring the arbitrage opportunities between various parties involved in the complete value chain.

“The market is very heterogeneous in all sense for logistics, fluctuating demand patterns, different centres for manufacturing and consumptions, excessive type of vehicle requirement are very glaring challenges with other aspects of poor infrastructure, and labour availability related issues. There is no ideal solution found as yet for this problem however some work is going on in the direction,” says Shah.

Adopting tech-enabled visibility 

In order to draw the maximum efficiency in trucking market, real-time visibility is quintessential, as managing a huge network of trucks crossing numerous state boundaries can be a herculean task without leveraging the technology and modern hand held customer friendly devices.

“Real-time visibility solutions can help tackle delays, productivity issues, accidents, diversion, and theft or damage. Apart from GPS tracking; fuel sensors, temperature sensors, advanced drivers-assisting systems, video analytics, etc. are increasingly being used. These devices find multiple uses across activities such as administration of good driving practices and dealing with issues like pilferage, security, dispute settlements, off-routing and quality assurance,” refers Sharma.

Intelligent transportation systems use information technology to improve the efficiency of transportation. Several solutions are being used by transporters or their customers to drive cost and service efficiency and mitigate risks related to safety and security. Some examples are listed below:

  • Weigh-in-motion (WIM) devices can quickly and effectively identify overloaded trucks.
  • Transport Management Software (TMS).
  • GPS/Radio Frequency Identification (RFID) tracking and real-time tracing of dispatched trucks.
  • Route planning systems.
  • Location monitoring systems.
  • E-way bill is a simple system which establishes direct linkage between declared and transported goods.

Customers in logistics space wants better and enhanced material tracking and visibility throughout, simply because of their further commitment to know in how much time the material will be delivered.

“Real-time visibility will certainly bring instrumental changes in overall trucking market. Better prediction and data can help in making strategy for load and route optimisation, as on an average; trucks in India are running below 18 – 20 working days a month, leading to substantial opportunity loss. It will boost planning and inventory management at large due to which even clients will be able to plan their logistics and supply chain more effectively,” says Shah.

“GPS-based tracking bolstered by Internet of Things (IoT), Artificial Intelligence (AI) and Machine Learning (ML) in route tracking, fuel uses, temperature sensing and driver assistance can get supreme solutions for visibility-related information. Further, automation in dock door scheduling, invoicing, order processing, payment, etc. with help of data and information gathered can help in saving more time,” adds Shah.

Future plans to enhance efficiency

India has the second largest road network across the world spanning over a 5.5 million kilometers, which shares approx 58 per cent of the total freight movement. The Indian trucking industry has been like many other industries far behind from the standards of developed countries; talk about power to weight ration which is one of the lowest, rare sight of wooden cabins or wooden loaded bodies and AC cabins, no sign of migration to tubeless tyres, etc. Domestic challenges like poor road conditions, social status of truck drivers, and scarcity of skilled drivers too are challenges for the country’s trucking industry.

The National Transport Development Policy Committee (NTDPC) has tried to estimate the overall freight traffic until 2031-32, using a growth rate of 1.2 times the GDP growth rate. It is also expected that water (coastal shipping and IWT) and railways would increase its modal share, bringing these environment friendly modes to at least 20 and 30 per cent respectively. This would bring road share down to 30 per cent, which would imply that road freight (in terms of btkm) would go up from over 1000 in 2011-12 to nearly 4000 in 2031-32.

Nonetheless, there have been significant changes in India’s logistics landscape in general and road transportation in particular in the past couple of years. A stable political environment for the foreseeable future, growing urbanisation, increasing consumption across all markets and associated increase in transport volumes augurs well for the trucking industry across the entire value chain. There is enough head room for growth and for everybody to make money. Sure there are short term challenges but these will smoothen out over time.

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