Friday, 1 September 2017

LOBB - Digital Freight Market Place. It is intercity B2B Tech Platform, connects truckers and transporters. 

Robot Controlled WareHouse- Alibaba

Ecommerce giant Alibaba opens ‘China’s smartest warehouse’

Ecommerce giant Alibaba launches china's smartest warehouse
Cainiao, the logistics arm of Chinese ecommerce giant Alibaba, has announced the official launch of operations at its new smart warehouse in Huiyang, Guongdong province.
According to Alibaba, it’s home to the largest population of mobile robots in China. There are over 100 AGVs (automated guided vehicles) in the warehouse, which occupies approximately 3,000 square metres.
Equipped with WiFi and self-charging, these robots are responsible for moving goods around. Looking not unlike a larger version of the Roomba robot vacuum cleaner, the AGVs can travel at speeds of up to 1.5 meters (5 feet) per second and carry up to 600 kilos at one time.
Cainiao currently offers same-day and next-day delivery services to more than 1,000 regions in China. When a shopper places an order on Alibaba’s Tmall shopping site, an AGV is activated in the Huiyang warehouse. It locates an ordered item in the warehouse and transports it to a human warehouse clerk, who assembles and ships orders to customers.

New efficiencies

Since the warehouse began operations in July, the company claims that efficiency among its human workers has improved three-fold.
In a traditional warehouse, Cainiao reckons, a worker might be expected to sort through 1,500 products during a 7.5-hour shift and fetching each item might require them to walk 27,924 steps during that time. “Now, thanks to the mobile robots, the clerk could sift through 3,000 products in the same shift, while only taking a significantly fewer 2,563 steps a day,” said the Alibaba Group company in a statement. 
Each mobile robot is equipped with sensors, to avoid collisions, but managing an AGV fleet of this size still comes with challenges, according to Hu Haoyuan, a senior algorithm specialist at Cainiao.
“The computational difficulty of commanding 100 warehouse robots is much more complicated than instructing ten robots,” he said, explaining that collisions aside, there is also a need to optimize efficiency and minimize traffic congestion.
When fully charged, each AGV can work for eight hours straight. When its battery gets low, it automatically finds its way to a socket and recharges itself.

Tuesday, 22 August 2017

Tech charts the course, but logistics isn’t on road to profitability yet

Hankering after customer acquisitions, logistics firms are burning cash by cutting prices and incentivising truckers and agents. The fragmented nature of the business means no firm will make money for the next 10 years.
It is 6.00 am, and over 100 trucks owned by LCM Logistics have queued up at a warehouse owned by Reliance at Peenya Industrial Estate in Bengaluru. T B Subramanya, the founder of LCM, a seven-year-old company, has to manage another 400 truckers associated with his logisticsfirm and is coordinating with his team to apportion at least 10 deliveries per truck across Bangalore.
He switches to Kannada to explain why logistics can be such a nightmare.

“I have to manage my cash cycle by ensuring payments to truckers across 45 days and then make sure I get paid by the corporate. It is a never-ending cycle,” he says. He adds that despite the advent of technology, things come back to brass tacks – collecting cash from the corporate, managing payment cycles of truckers, and paying salaries and rentals on warehouse assets.
“Get this cycle wrong and this business is not for you. While technology sets all the alerts and charts a course, one cannot control the fragmented nature of this business,” Subramanya says.
Technology has enabled Subramanya to track payment cycles; he’s able to get brands to pay up and by doing so, is able to pay these truckers.
“But who is to say that these brands will honour payments on time? This is a chronic problem in the industry where working capital management is a key issue to survival,” he says.
Modern Logistics, whose USP is tech, will burn cash because they are still on a customer acquisition spree and payments from clients are delayed.

The absence of margins

Subramanya, like others in the business, agrees that tech only allows data capture and tells a business about payment cycles. But unfortunately, margins are a function of operational efficiency in the system and are absent.
LCM Logistics, a Rs 45-crore company, makes a 7 percent gross margin on its business.
According to EY, close to a billion dollars has gone into technology-led logistics companies, but unfortunately, all of them are still hankering after customer acquisitions. Like the e-commerce industry, these companies are burning money on the brand side by reducing prices and are incentivising truckers and agents on the service-supply side.
Mohandas Pai, Managing Director of Aarin Capital, says, “A lot of companies are living off investor money and will take a long time to break even on the B2B side because they are still acquiring customers.”
The sad part is that once investor money dries up, the industry will have to go back to competing with traditional businesses.
Naganand Doraswamy, founder of IdeaSpring Capital, says: “The hope by then is to figure out if logistics companies can appreciate technology that can track asset utilisation and provide a way to manage working capital. But the industry is fragmented and startups will face a challenge because collecting money will remain a challenge.”

The fragmented nature of the industry

According to the All India Motor Transport Congress, there are close to 12 million trucks in India and about 90 percent of them belong to single-truck owners — small entrepreneurs — in small towns. This is what makes it difficult to integrate technology into their lives.
In Namakkal, Tamil Nadu, a technology company called LOBB is working with agents to use their technology to manage loads across cities.
The founders, Venu Kondur and Jayaram Raju, have 8,000 truckers on their platform and have signed up 200 brands on their real-time logistics platform. The platform allows agents to understand movements of trucks from one city to another and book return loads. It also allows agents to manage part-truck and full-truck loads. The platform intends to increase asset (truck) utilisation for agents and drivers and is reducing prices for brands, thanks to the availability of trucks to ship the product to other regions.
“The fragmented nature of the industry is largely because of the lack of pricing information, per kilometre basis and the tonnage of the vehicle, between all parties. Agents themselves don’t know that they can bring prices down and ensure timely deliveries by increasing truck utilisation,” Jayaram says.

The money-go-around

The opportunity of changing India has led investors to put in enormous amounts of money to create awareness in the industry. Companies like EComm Express, Delhivery, BlackBuck and Rivigo were some of the companies that cropped up over the last seven years to capture this opportunity of ensuring great service and making pricing transparent.
The portent that led to a reality was the passage of the Goods and Services Tax, which created a single-point taxation system. Under the new system, the movement of goods across state borders would be faster and investors realised this would change the nature of fragmentation in the industry.
Investors took a bet that large corporate logistics players like Fedex and DHL would begin to invest in the entire supply chain infrastructure (from cold chain to warehousing to surface transport to shipping) and therefore also work with new-age technology companies organising the industry. However, no one realised that India’s industry, agriculture and manufacturing is catered to by local logistics players who also work with larger brands. The scale is just too big, for the moment, for modern technology (truck, delivery and warehouse utilisation technology) to penetrate across 3,500 mandis that serve 600,000 villages and 48 million SMEs spread across 70 clusters across the country.

An eye on the trucking ecosystem

Investors believe that these modern-day logistics companies will offer quick returns because they can acquire a lot of customers. Profitability is not important for the moment as growth in people using technology is what matters to investors.
“No wonder the industry is burning money,” Pai says.
Right now, the scheme of things involves acquiring as many customers (agents, truckers, and brands) on the platform. The older players do not incentivise anyone they work with on realistic pricing.
For example, a 14-ton-multi-axle full truckload with a 32-feet container from Bangalore to Kolkata costs between Rs 80,000 and Rs 85,000 if a brand worked with a traditional player. A new-age company works on pricing that is 10 percent lower, offers immediate availability of the truck and tracks delivery. Unfortunately, the investor-funded industry is incentivising the trucker and reducing prices for the brand that needs the product to be shipped. This is where the burn is happening. Profitability seems far-fetched because of the high cost of operations, including high salaries, incentives, payments made to truckers without recovering money from the brands and delays in payment by brands.

But there’s a reason…

However, these new-age companies are onto something big. They are burning cash because they are collecting data to understand the industry and are creating a platform that can simplify the logistics industry. Today, they are ensuring that there is full asset utilisation — full truckloads from point A to B, and also when the truck returns from B to A.
The logistics industry also has a part truckload system, where several brands are aggregated onto a truck, and products are delivered on a particular route. So if a trucker is driving from Bangalore to Kolkata, there may be drop-off points in Hyderabad and pickup points there too.
While this works, it will take a long time to become profitable. Investors have to stay invested for a decade or more because 90 percent of the industry is fragmented. Not to forget that Indian businesses tend to work with those offering the lowest pricing and extended credit terms.
Sources also say truckers work with companies that are incentivising them. In the end, managing cash and acquiring customers will determine valuations.
Naganand, of IdeaSpring Capital, says, “The industry by itself will not change overnight.”
Therefore until payment cycles get sorted, at brand level, and incentivising of truckers does not stop there is every chance that modern data logistics companies will not make money in the short run. They need to make sure rentals on their assets, such as warehouses, are low and salary costs do not burn investor equity. But the cash burn will help acquire customers and create processes that will become the blueprint for the future of the industry.
No wonder companies like Rivigo and BlackBuck have raised large sums of capital. Rivigo has raised $115 million and expect to raise more this year while Blackbuck has already raised $100 million. Both companies are eyeing the trucking ecosystem.
Then there are companies like Delhivery, which is managing intra-city delivery and handling warehousing as a service. It has raised $257 million and has also invested in companies like Qikpod, Parcelled, Rocketbox and Opinio as they complete last-mile delivery and storage services.
Rivigo and Blackbuck, apart from their valuations, are increasing their revenues rapidly with these investments. As of the last financial year, they were clocking a run rate of more than Rs 200 crore and Rs 100 crore, respectively.  These companies must very play a long-term game to increase revenues and create value or find a suitable large logistics corporate to buy them over.
There have not been large exits or acquisitions in the Indian logistics industry.
Ankit Sethia, Founder of HipShip, a Bangalore-based express delivery service platform, says: “Tech can succeed if it enables Indian businesses to discover the right pricing. Tech companies should not acquire physical assets like warehouses and trucks, which is why logistics corporates stay away from the cash burn business and there have not been large acquisitions yet.”  The big players who follow an asset light model are Porter in the intra-city play and there is BlackBuck in the full truck-load space.

The deal sizes

Of the 200-odd logistics startups in the country, only 20 companies have been able to raise large rounds of money. According to YourStory research, logistics only had 28 deals in 2016 and deal sizes were smaller than in 2015. In 2015, ECom Express raised $133 million while Delhivery was able to raise close to $85 million.
Jones Lang Lasalle pegs the current market size of the industry at $150 billion, expecting it to grow to over 220 billion by 2030.
Anish Basu Roy, Co-founder of Shotang, a technology-led distribution company, says “One has to work directly with brands to price products cheaper for the retail ecosystem and reduce logistics costs by estimating demand. This is done with technology.”

Helping shape the supply chain strategy

According to research and consulting firm McKinsey, current wastage because of logistics is 4.3 percent of the GDP; it is expected to go towards 5 percent by 2020. The wastage is because of delays in movement across the country due to scarcity in the number of trucks in the country, tardy payments, no consistency in pricing and lack of good service level agreements.
Prakash Tulsiani, COO of All Cargo Logistics, a Rs 5,568-crore logistics company, says: “GST will rapidly change the way businesses work on their supply chain and how Indian companies export products. There will be a consolidation of warehouses and manufacturing plants. The business opportunity lies in helping these companies shape their supply chain strategy.”
The question to ask is whether the likes of DHL or Fedex will acquire Indian logistics startups or fund them. But before these global companies invest in them, there is a need to reduce the cash burn as none of the funded logistics companies are profitable.  Investors have stepped in for the sheer size of the market, but one can only speculate whether they are playing to consolidate the industry or create value through innovation.
 Source : Yourstory

Saturday, 24 June 2017

GST - Positive Development in Transportation sector

Friday, 9 June 2017

Typical Indian Driver Time Usage on Roads

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Thursday, 8 June 2017

GST- Impact on Transportation

A shift to the organised logistics sector, consolidation of warehouses, lower logistics cost and boost to express cargo operators – rating agency ICRA expects all these changes once the Goods and Services Tax (GST) regime kicks in.
To understand the impact of GST on the logistics sector, BloombergQuint, in its special GST Countdown series, spoke with Subrata Ray, senior group vice-president at ICRA.
A report, authored by you, makes the case that GST will trigger a shift to the organised logistics sector. Why do you say that?
Today, the logistics segment is highly fragmented. The primary use of logistics is from the manufacturing sector. First, the goods are sent to warehouses, from warehouses goods go to smaller distributors, and then eventually to the end retailer. The logic of setting warehouses today depends on both the demand aspect as well as the taxation aspect. Because if you are setting up warehouses in a single city, as you transfer the goods to another state, you have to pay additional central sales tax (CST) of 2 percent.
Currently there is a 2 percent CST applicable for inter-state supply but if a company sets up a warehouse in each state, CST isn’t applicable as transfers between inter-state warehouses are treated as stock transfers,,
Yes, exactly. So today the major incentive for setting up multiple warehouses across locations, across demand centres is to ensure that you don’t end up paying higher taxes. But post GST as this transfer tax gets subsumed in the overall GST, the economic logic will come into play. We don’t expect consolidation to happen immediately, but over a period of time we expect the number of warehouses to come down. We will have bigger warehouses in a more centralised location. The location of the warehouse will be decided purely by economic considerations and the number of warehouses will come down.
Can you illustrate how the logistics of transporting goods will change once GST kicks in?
In the pre-GST regime, if a manufacturer is located in one state, he sets up warehouses in multiple locations in each state; at least definitely in various geographies - central, western, north and south, and also in maybe multiple other states. Now the goods are transported by the manufacturers to warehouses and then from warehouses to distributors and retailers further down. Typically, the transportation would happen through a full truckload system from the manufacturer to warehouses, and then from warehouses to distributors and retailers in less than truckload format by the subsequent transportation house.
Post the implementation of GST, we expect the number of warehouses to get consolidated eventually to one or two large warehouses. So the number of warehouses will come down. At the same time, the quantum of goods that is getting transported will increase significantly. So, a single warehouse will handle a larger quantum of input. So effectively, you’ll have much bigger trucks and possibly carrying over a longer distance between manufacturer to warehouses. So, we will see higher tonnage trucks being used and we will also see operating efficiencies coming in from scale economics.
From warehouses to distributors and retailers, the chain will become wider because now from a single warehouse, the goods will get distributed to many distributors. So this segment can be handled depending on the type of goods or the nature of goods by less than truckload or full truckload; distributor to retailer would be obviously less than truckload format.
How is this choice of full truckload and less than truckload made by manufacturers and how will it change post GST?
Ideally, trucks would like to operate in a full truckload mode. Basically, use the full truck capacity between one location to another because that helps you achieve efficiency.
So transport more goods in a single trip?
Yes, but when you are transferring fewer goods, it is not possible to get full truckload. So you’ll be typically using a smaller truck. But even then, it’ll be a less than truckload situation. So, you’ll be transferring truckload, smaller lots, less than truckload between shorter distances. Post GST, the manufacturer to warehouse transportation will get consolidated and the tonnage segment will go up significantly.
How is it different from what happens today?
Today, there are multiple warehouses. So, there was distribution of load. In various product categories, one was not able to use very large capacity trucks. And secondly even the distances were smaller. Larger trucks typically give the best operating efficiency when you operate over a longer distance and carry the maximum quantity of goods.
 What factors will determine warehousing strategy of companies?
The warehouse locations now would be entirely decided by nature of goods, distance from manufacturing plant and economics. We believe there will be a lot more investment in technology. So, you will have larger trucks operating. You will also see that the warehouses will get consolidated. Warehouses will use greater amount of technology in terms of labelling, tracking and other activities. Also, there will be investment in cold chains. So, we expect investment in the logistics segment to move up the value chain and a greater degree of investment in technology.
How will GST impact express cargo operators, given that tax treatment wise, they will be at par with Goods Transport Agencies or GTAs?
Currently, there is some difference in terms of taxation. Express cargo operators end up incurring a higher tax rate (15 percent) because of lack of abatement (compared to GTAs at 4.5 percent) . But now, with the input tax credit coming in, the difference will go. So effectively, under GST, the GTA operators and express cargo operators will have the same tax incidence of 5 percent.
The other aspect of GST that is likely to make transportation of goods efficient is e-way bills. Do you see any challenges in this process?
One of the biggest operating inefficiencies that creep into logistics is because of check posts. At every check post, if a good is transported between from say Delhi to Chennai, it has to go across multiple check posts and at each check post, there is time spent in clearing goods. The estimate is that the time wasted could be in the range of 20-30 percent. The expectation is that post GST, since number of the state level taxes will come down, the requirement to do border checks will come down too. Additionally, if the e-bill is used properly, in terms of proper digitisation, the time spent at check posts can come down significantly.
However, there are question marks on operational aspects because the requirement of having check posts or having physical checks hasn’t totally gone away even under GST. So, we have to actually see how it pans out in the implementation phase and if during implementation the actual amount of time spent at check posts continues to be the same, the advantages of introducing GST will be reduced significantly.
What could be some of the implementation challenges?
In each e-way bill there will be multiple points which would need to be checked. One is, that at every check post, the person who is checking may not be fully qualified or fully experienced in doing those checks. So if you’re doing a manual check, it may take a lot of time. Two, sometimes there may be trivial variations in the manual entry; so those trivial variations may lead to a hold up or may lead to, as in the past, people paying bribes to get through the check posts. I think the government needs to address such issues. You will have to train the people on the ground on how to use the new system in terms of checking because in the initial months, probably, people may continue to use existing systems.
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