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Freight Efficiency In The Next Decade In Indian Transportation Industry
1. Freight Efficiency – Next 10
Years
Indian Road Transportation IndustryRaghav Himatsingka
Director, IDEAL MOVERS
2. Ideal Movers – a $100M annual revenues, 100% private
company
Leading logistics transportation company in India owning nearly 2000
tractor trailers, Goldhofer axles, forklifts & heavy lift cranes
Who are we?
Apollo CV Award – All India Large Fleet Operator Of The Year ’13
Specialization in road transportation, freight forwarding, material
handling, heavy lifts, special cargo transportation
Specialists in steel, coal, automobile,, projects & minerals transportation
Pan-India presence and experience in dealing with varied industries,
clients, partners and service providers
Seller, customer and operator of commercial vehicles
3. Raghav Himatsingka – Director, Ideal
Movers
Masters in Management Science, Stanford University
Bachelors in Industrial Engineering (specializing in
Logistics & Supply Chain), Georgia Tech
Nominated for Transport Youth Personality Of The Year –
2013
Set up new business division in Ideal Movers in 2010,
contributing $20M annually by end of 2013
Who am I?
4. Expectations from this discussion …
•Commentary on Product Innovations
•Fancy statistical predictions or insights
•Hypothetical predictions or unrealistic wishlists
•Insights into any global trends
•Complexities of road transportation in India
•Issues unique to India: including fleet management,
corruption, infrastructure challenges, manpower
challenges, weak legal framework and bureaucracy
•Meaning of Freight Efficiency in the Indian context
•Achieving Freight Efficiency in India through
technology, telematics and training – a fleet operator’s
perspective
5. Factors Affecting Freight Efficiency
Freight Efficiency
Predictabl
e
Operation
s
Overall
Costs
Transit
Times
Transit
Damages
Overall Costs
• Reduction in overall cost to
the consignee
Transit Damages
• Reduction of costs due to
transit damage to
consignment
Transit Times
• Reduction in transit times to
reduce inventory holding
costs and opportunity costs
Predictable Operations
• Reduction of uncertainties in
transit and turnaround times
6. Cash transactions for en-route expenses – no expense
trail
Uneducated drivers - $100-$150 monthly salary, sleep
and cook in vehicle 11 months a year – no incentive to
perform
Rare use of GPS – manpower costs overweigh its
benefits.
Accidents (sometimes fatal) common – Up to 5% vehs.
yearly
Weak legal recourse to theft of cargo – often times by
the driver. Not uncommon for driver to abscond with
cash, abandoning the vehicle.
Overloading of vehicles beyond permissible limits
common in some parts of the country and in some
industries.
Fragmented market - several hundred thousand players,
difficult for large players to consolidate and expand on
basis of capital investment, technology and manpower.
Increases
overall Costs
Transit Losses,
Unpredictability
Unpredictability
Costs,
Damages,
Unpredictability
Overall costs,
unpredictability,
transit times
Transit times,
unpredictability
Affects costs,
overall efficiency
Unique Problems In The Indian Context
7. Consignor
3rd Party
Logistics
Transporter Munshi
Brokers/Unions
Vehicle Owner Driver
Labor
Consignee
Way too many stake holders and middle men - all with their
own profit margins - creating a very inefficient market.
Increases Overall Costs to
consignee.
Stake Holders Of Indian Transport Operations
8. • Cost of finance
• Interest Expenses
• Depreciation
Fixed
Costs
• Repairs/Maintenance of assets
• Overheads & administrative expenses
• Salaries, rent, business development, etc
Variable
Costs
• Fuel expenses
• Toll Taxes
• Others – Police, Road Mafia, Incentives
En-route
Costs
• Idling of assets
• Under/inefficient utilization of assets
• Empty runs without freight income
Notional
Costs
Consignor
3rd Party
Logistics
Transporter Munshi
Broker
Vehicle
Owner
Driver
Labor
Consignee
Vehicle Owners
Understanding Costs Of Fleet Owners
9. Factors Affecting Freight Efficiency
Freight Efficiency
Predictabl
e
Operation
s
Overall
Costs
Transit
Times
Transit
Damages
Overall Costs
• Reduction in overall cost to
the consignee
Transit Damages
• Reduction of costs due to
transit damage to
consignment
Transit Times
• Reduction in transit times to
reduce inventory holding
costs and opportunity costs
Predictable Operations
• Reduction of uncertainties in
transit and turnaround times
10. KEY IDEA 1 – Driver Empowerment
Severe shortage of new
drivers
Driving was a respectable job
Poor pay, atrocious living
conditions, lack of respect
in society, lack of
recognition for
performance, no scope for
professional growth, plenty
of other opportunities via
government schemes and
private jobs.
Driving a big truck was manly.
Respect in their community, society from
women & elders.
Chance to travel – a rare privilege 2
decades ago.
Good pay compared to available
opportunities.
Roads were poorer, but traffic was light.
Smaller fleet sizes – more respect and
recognition for drivers from their
employers; more loyalty from drivers.
Lack of other opportunities.
11. KEY IDEA 1 – Driver Empowerment
•Drivers treated like all other
employees
•Performance based yearly
evaluation
•Health & medical benefits
•Educational benefits for family
•Personal loans from companies
•Safety training to avoid accidents
•Housing quarters on major highways
•Ownership stake/vehicle buy-back
option
•Driving becomes aspirational –
comparable to other jobs
•Stable income and greater respect
means integrity of drivers increase
•Reduction in theft/abandoning of
vehicles
•Consolidation of smaller players
• More investment into training,
benefits and technology.
• Economies of scale – higher
utilization, less idle time.
• Entry of foreign players.
Far better utilization of assets means significant reduction in Notional Costs
Better trained drivers – reduction in transit times and transit damages
Drivers rewarded according to performance – far superior predictability in transit
times
12. KEY IDEA 2 – Technology & Telematics
Consolidation of large players, entry of foreign players,
better products mean more investment in technology.
Using technology becomes easier and more affordable
with economies of scale – trained manpower to use the
same.
Use of technology enables accurate determination of
fuel consumption.
Use of telematics will enable accurate measurement of
driver’s performance which will help incentivize good
performance.
Perfect information flow via technology and
consolidation – an OpenTable like software for
unutilized fleet.
Perfect planning through technology – reduces problem
of oversupply at an under-demand location and vice
versa.
Increase in overall
efficiency.
Increase in overall
efficiency.
Reduction in en-
route costs.
Better transit times,
less damages.
Reduction in
Notional Costs and
Stake Holders
Reduction in
Notional Costs.
13. Summarizing our thoughts …
What we will achieve?
Reduction in Notional Costs
Reduction in Transit Times
Reduction in Transit Damages
Reduction in Unpredictability
Better planned, more organized, FAR more efficient
system
What will remain the same?
Some of the problems unique to India – weak legal
system, unaccounted cash expenses en-route, several
stake holders in the cost model, several hundred thousand
fleet operators!