Speeding up DHL, FedEx: how digital startups are rescuing the freight industry from a time warp

A century-old industry, freight forwarding in India is mired in archaic and manual processes. A bunch of startups is giving it a digital upgrade.But getting big companies to change their age-old ways has never been easy.

Speeding up DHL, FedEx: how digital startups are rescuing the freight industry from a time warp
Speeding up DHL, FedEx: how digital startups are rescuing the freight industry from a time warp

(From left) Raghavendran Viswanathan and Mohammed Zakkiria A, cofounders, FreightBro; courtesy of FreightBro

 

A year or so ago, Delhi-based international freight-forwarding company SA Group built a 15-member tech team to launch an in-house startup, LogYcode. The aim was to focus on "digitisation", using blockchain to develop freight- forwarding solutions.

It may have drawn an eye-roll, had this not been a company from a century-old industry that runs on archaic manual processes. E-mail is the farthest that technology has travelled in this sector. And that, too, is because there's no transparency over fluctuating freight rates which leads to haggling on quotes over emails and phone calls.

The lack of transparency is the bane of this sector, which still lives in a pen-and-paper era. Leave aside inefficiencies and delays, it results in price increases to the tune of 10%-20%. That in turn reflects in logistics costs as they form 2.5%-3.5% of the sales number in India - compared with 0.8%-1.5% globally.

It's not a good sign at a time when cross-border shipments, led by a surge in e-commerce, are slated to grow exponentially: India's e-commerce imports and exports are expected to touch USD20 billion andUSD4 billion, respectively, by 2025.

And that is why the international freight-forwarding industry needs to digitise quickly.

For starters, here's what the SA Group's Logy code has pulled off:
•    Cutting down 2 step initiating a super-from receiving a query to invoicing to just five 
•    Online document preparation, automated freight pricing, and obtaining quotation from multiple carriers.
•    Real-time tracking of shipments.
•    The number of queries handled in a month has doubled from 3,500 to more than 6,000.
•    A person can now handle 30 queries a  day instead of 17 earlier.
•    During January to June, 0,627 one of cargo was processed. During the same period last year that volume was 8,232 tonnes.

Clearly, digitisation can work wonders for the freight industry, similar to what Blackbuck, Rivigo, and Delhivery are doing with trucking and courier services in India. While the SA Group is solving different parts of the puzzle internally through LogYcode, a slew of startups such as Cogoport, FreightBro, FreightTiger, are challenging the existing setup and FreightCrate
with their own business models.

Bringing about a sea change
Let's first get a flavour of the interventions these startups are making.

Suppose X is a sales guy at DHL, a freight-forwarding company. DHL customer, Reliance, wants to send 20 containers to move cargo from Mumbai to Hamburg, a major port city in northern Germany. When Reliance asks for the best rate, the sales guy goes back to DHL's pricing team, asking them to check with all container operators and suggest the best rate. The team collects quotations from all major container operators, compares them internally, and gives three or four rates to Reliance to choose from. The whole process takes a day or two.

Compare this with what DHL can do using FreightBro platform. DHL gets a mobile application, which enables its sales person to search for Mumbai to-Hamburg freight rates. With just a few taps, the sales person gets all the options and sends a quotation to Reliance within a few minutes.

"Typically, a sales guy makes 20 to 25 quotes on a weekly basis. Our system is able to do 100 quotes, with an increased capacity to handle big customers. That translates into 30% reduction in sales costs for companies," says Muhammad Zakaria A, co-founder, FreightBro.

FreightBro's business model revolves around providing a SaaS platform that transforms a conventional freight forwarder (one who trades in container spaces provided by shipping lines) into a digital entity.

There are about 20,000 freight forwarders in India, handling 12 million containers although there are about half a dozen container operators like Maersk. "We want to capture the entire container transportation market which is 12 million TEU (twenty-foot equivalent unit, which is used to ship's cargo carrying capacity), not just the 20,000 freight forwarders' market," says Zakkiria.

Although FreightBro believes it will be impossible to eliminate freight brokers, it has also created a booking platform from which small exporters and importers can book containers directly, without any freight forwarder facilitating the process. Last month, the platform crossed the 1,000 container bookings milestone.

The startup works with 500 freight forwarders on its platform, including some of the oldest freight- forwarding entities such as Jeena & Co, Teamglobal, United Maritime (Sri Lanka), and Gloshipping. It operates a sales team at the Mumbai and Chennai looking to set up its presence at ports and is now other major port cities.

Unlike FreightBro, which is turning freight forwarders into digitally powered entities, FreightCrate aggregates multiple entities on its platform -exporters and importers on the demand side and local transporters, trucks, customs agents, freight forwarders, and shipping lines on the supply side.

Why freight pricing needs a MakeMyTrip-like solution
Up next is dealing with the biggest challenge in the freight-forwarding industry zero transparency.

When an importer or exporter receives a quotation from a freight forwarder, there is a laundry list of charges. Say there's an import consignment arriving from China. There are ocean-freight charges from China to India Nhava Sheva port, where there will another bunch of terminal charges and shipping line charges.

There is a good 20% differentiation between the charges of various shipping lines. The average small and medium-level company works with around half adozen freight forwarders, who all send quotes via e mail. The quotation formats can be different, with missing pieces of information such as transit time. Hence, a lot of back and forth happens on e-mail, and the freight forwarders and the shipper have to get on multiple calls to sort things out. As a result, arriving at a decision can take up to three to four days. "Our online platform brings together all of this to one window. It's like a MakeMyTrip or Expedia for booking freight," says Samir Lambay, CEO at FreightCrate.

FreightCrate's tech-enabled platform provides companies with all-inclusive pricing and delivery dates for transit times in a standardised format, regardless of how many vendors are involved.

Once a customer enters details such as enquiry, shipping destination, and cargo weight on the platform, it sends a negotiated costing from, say, an overseas point to India, including the transportation cost from the supplier, the customs clearance, and the air freight to India. If the customer chooses, the customs clearance at the Indian airport and the transportation from the airport to the company's
warehouse can also be handled.

Accel Partners-backed Cogoport, another startup in this space, provides a warehouse-to-warehouse shipment solution to both exporters and importers on its marketplace. Since its launch in 2017, Cogoport has attracted more than 25,000 exporters and importers to its platform. It also aggregates pricing from 40 major international shipping line partners. The Mumbai-based company, which has 12 offices across India and the Netherlands, works with 300 freight forwarders and claims to save 40 man-hours for booking export shipments.

Ready for a long haul
"Conceptually, the technology is the same as for MakeMyTrip, which was founded in the 1990s. But the freight industry is late to technology," says Lambay. "It is where the insurance industry was ages ago. You had insurance companies and agents and then it all came online."

The startups say that as they scale, the quality of vendors they add to their online platforms will be key to how good they are at pricing and operational efficiency. Also, as they scale across different geographies internationally, they will face the challenge to find experienced people to lead their operations.

However, startups say the most difficult task is to change the mindset of the big players in the freight industry the likes of international shipping line Maersk, or DHL who have been in the business for decades, with established customer relationships and networks.

The top 10 shipping lines including Maersk, Mediterranean Shipping Company, and Cosco control almost 70% of the trade and all of them have different internal processes. Changing the way they work will take time.

"We are trying to introduce new features to our technology platform in a phased manner because most customers are slow to change their usual ways of working," says Ashish Asaf, managing director at SA Consultants, the promoter at LogYcode. New-age startups in the space should digitise all aspects of the end-to-end value chain, not just some aspects such as pricing and quote generation, he adds.