Mr. Tikam Chand Jain, CEO of Fleeca India, India’s leading tyre management service provider, sat down with Mr. RamratanSinghi, CEO of Sure Group, for a freewheeling conversation on the impact of COVID-19 on the transportation sector
I wanted to start off by asking you as to what has been the economic impact of COVID on your fleets business?
The economic impact has been substantial. We presently have only 5 vehicles running currently out of 95 vehicles. The freightage on long haul routes is very bad. A lot of our drivers have gone home, andhave not been able to get back. Our direct customers are all majorly shut down. We are plying by getting loads through truck aggregation applications such as Rivigo, Blackbuck and the loads which are being carried are majorly pharmaceutical or essential commodities only.
How do you see the logistics sector planning out post the COVID lockdown? What are the changes that you visualize in the sector?
Over the year, demand side may be affected, and the load factors of the logistics industry may be affected. It may take over 3 months for demand side to stabilize again. There definitely will be a small pent up demand which will be observed, but even this shall be for a limited period only.A lot shall depend on how keen the government is to restart the economy. It will depend upon how much the government is ready to put money in the hands of the people.
There has been a huge confidence loss in the economy – there have beenhuge job lossesand people are pondering about an unpredictable future.People will now tend to save more, rather than spend. In such a scenario onlyaround 30% of economy will be able to restart.
Commercial vehicle sales will be drastically affected. Everyone is fighting for the same demand, leading to commercials not stacking up anymore. For example, the rates for a freight from Ambala to Chennai have dipped to INR 75,000/- whereas even in a normal case the rate would not be less than INR 85,000/- .
There are more vehicles and less load available – leading to rates dipping and making it uneconomical. These are all signs of the near-term future.
You have stated in the past your views on how the scrappage policy can drive sales of commercial vehicles? How do you think this has been affected by the COVID situation?
Over the past few years, SIAM and other industrial bodies in the automotive sector have been pushing the governmentto start the scrappage policy, as this will lead to some increase in demand. Presently what is happening is that customers continue to use their vehicles beyond 10 years by making small modifications to the vehicle – even though the vehicle may not be efficient, and may be highly polluting as well i.e. even though their operational economies may not be working out on them. Still customers are continuing to run these vehicles. This is happening because customers do not have any incentive to change their vehicle presently.
Globally, especially in countries like Germany and USA, whenever the automotive sector has gone through a cyclical downturn, the governments have launched schemes by which they have incentivized people to scrap their vehicles. Even as we speak today, Germany is looking of doing the same today as well after the pandemic problem is sorted. This is because they know that their automotive sector does not have the demand today to sell – they need to take steps to create this demand, they need to take steps to remove vehicles which have been active beyond a particular time. Germany has done this twice or thrice, but India has not taken this step anytime before.
I feel this is a very legitimate demand from the automotive sector, because once you drive this, you also drive the automotive ancillary sector, and these sectors together can create numerous jobs.
How do you feel that technology can change/ will impact the business scenario in the logistics sector in the near future? Because if we see today, the logistics industry in India is still primarily being run through communications over call etc. So what do you envision for the near future? Because technology can bring in substantial cost efficiencies, but also require investment in the near term?
Over the last 3 to 4 years, some technology has come into fleet operations in India. For example most organized players do have GPS integrated into their trucks or have incorporated fleet/transport management software etc.
The challenge that we however face is from the end user point of view, because the industry has too many layers in between and thus the end user is not really willing to give you any additional value for all these technologies. Customers do not have that vision for incorporating technology.
We need to encourage the end customers to adopt digitalization and usage of technology –simple things would suffice for now on this aspect.For example accepting of e-POD, establishing proper communication channels between the customer and the customers warehouse where vehicle shall be reaching to understand whether the warehouse shall be available to unload at particular time and date etc. There are so many areas where we want our customers to leverage technology, but they do not do so. This happens because this end customer is not our customer – there may be another transporter, broker, third party logistics partner of companies etc. – there are so many layers in between that the end customer does not know whose truck is coming and going. The chain is not mapped end to end in the way that it should be. For example imagine if you order one small packet from Amazon – you will get constant updates on the status of the delivery of these packets. Imagine if we had this level of inter-coordination in our supply chains – imagine the amount of savings that are possible by this. But no body is working on these parameters. Whenever technology is being used to bring a certain order or system with the customer – then nobody wants to use it.
I agree. Such challenges have led to a reduction in the efficiency of the supply chain. We have also observed these challenges. Do you feel that even Blackbuck and Rivigo have not been able to sort out these issues? Are these issues, generic issues faced by even these players?
Blackbuck and Rivigo have been fairly successful in one part – that is with the elimination of the brokers in between who were one of the major pain points for the industry in terms of holding back payments etc. Blackbuck and Rivigo were able to make very clean payments. But over the recent past we have observed that both these companies have scaled back their operations substantially as well. This may be due to funding challenges or maybe because they have burnt a lot of cash over the past few years with their effort to make the industry more efficient.
Rivigo’s relay model did have the potential to change the way that we do logistics in India. The industry is struggling enormously because nobody is willing to give the right value for the time of the truck – whether it is at the loading or unloading point or whether it is enroute. People were earlier taking 6 days to go from Delhi to Chennai, same thing Rivigo was doing in 48 hours! Imagine the amount of cost savings/inventory savings possible if we can cut short 4 days from our supply chain time.
The industry is not evaluating things from these parameters. They are not evaluating on the basis of time saved, inventory costs etc. They are continuing to run businesses on the terms of the last two years.
Customers are only working on the lowest cost per kg matrix. Customers need to understand that these are just the prima facie costs. If customers start calculating other costs – for example the inventory holding costs, they will definitelyobtain that if they can save 3 to 4 days of their logistics time, then they will definitely get a much more cost efficient system.
What are your views on the issues that startups in the logistics sector should be working upon?
For a lot of startups now, the real innovation is nothing much more than creating a app. The real processes behind the task is not changing much, it is just that instead of picking up a phone call, you are doing the same thing on the app – it is innovation, but not big innovation.
For the logistics industry,startups need to firstly identify the key pain points faced by the industry. First pain point is obviously the low utilization of trucks – Rivigo and Blackbuck have tried to solve this using their own methods, but to an extent the industry has not been ready to accept the things they have brought into the picture. Another pain point is the highly unorganized and fragmented industry that we have today. Another challenge is the large loading/unloading times, and identifying other areas where the trucks are losing time.
Generally in most countries, even South Africa, which is at a comparable stage of development, there is a very efficient system of truck loading and unloading. In India, these processes are still manual – and that is because the labour is cheap here. We are trying to run a pilot project with major companies to show the benefit of palletized cargo. There are challenges, as the pallets in India are majorly for warehousing purposes and are not transfer pallets. If we can ensure that the product which is manufactured is put on a pallet and this pallet moves across the supply chain – instead of moving box by box, we will not only shorten the loading/unloading time but will also help sort out the MIS, ease out the tracking system and there will be less pilferage, damages also. In the COVID area, the more the contact of cargo with people, the more the risk of transmission – a palletized system shall eliminate or drastically reduce this threat as well. So it makes sense now to go in this direction.
You have been a valuable customer of Fleeca over the past year. How has your experience of working with Fleeca been? Could you share your feedback on our services as well?
So far we have used Fleeca’s Tyre Management Services under the Cost Per Km model. As of now the experience has been positive, because we are able to save all the time on the tyre now. Earlier, if we were not able to devote sufficient time, then the life of the tyre would get drastically reduced. I feel that the Tyre Management Outsourcing concept introduced by Fleeca is a great concept. Apart from this, another aspect that I really appreciate is that Fleeca, through Fleeca Centers, has people on the major highways. At times when a fleet operator is stuck somewhere, he can take Fleeca’s help to get things sorted out – this may be something as simple as a breakdown of the vehicle or some untoward incident on the vehicle. The last experience that I had was when our vehicle was stuck during the lockdown and the driver was unable to start the vehicle. We took your help in this case and the issue was resolved. To resolve the same thing sitting from here would take an enormous amount of time and effort.
Going forward I would suggest that Fleeca along with tyres also takes up brand agnostic maintenance of commercial vehicles. I think that is another value add, as most of these vehicles will now be over their service warranty period. – For us that could be another huge value add.
We have initiated with tyres. Our focus presently is on the tyre. But going forward we are planning to add such maintenance services also in our enroute services via the Fleeca Center. We are also looking at helping fleets with their legal compliances issues as well.
Perfect. I feel going beyond tyres and also offering these breakdown services can be a game changer in the sector because right now there is no one who can do that on a Pan India basis. Presently for any issue, we have to resort to finding someone on a local level, and most often these operators charge additionally for such services too. We sitting from here have no choice but to accept the charges being asked for.
Changing the mindset of traditional transporters and moving them towards such an outsourcing model however will be a challenge, but I feel that Fleeca is definitely on the right track.
Thank you, Mr. Ram Ratan for devoting your time for this highly insightful interview.
