New Delhi: Global logistics group DHL is planning to introduce internet-connected trucks and emulate technology-enabled logistics start-up Rivigo Services Pvt Ltd’s driver relay model to improve customer experience and increase efficiency, according to an industry executive with direct knowledge of the matter.
The new business unit, scheduled to begin operations early next year, will be overseen by Malcolm Monteiro, chief executive Asia Pacific at DHL eCommerce, the person mentioned above said.
Rivigo currently owns a fleet of over 2,000 internet-connected trucks and operates through a unique driver relay model.
The company employs multiple drivers on one route and each one typically drives for four to five hours before handing over the truck to another driver at a pit stop, returning home with another truck.
The technology-enabled trucks are fitted with sensors for location tracking and real-time data is monitored to eliminate errors and enhance services.
Rivigo, which started operations in 2014, currently has at least 70 such pit stops across India.
According to the company’s website, the driver relay model helps it reduce transit time by 50-70% from the industry average. DHL is planning to emulate the same model and is in the process of building a team and fleet of trucks.
On 23 June, Mint reported that DHL was planning to invest over $100 million in supply chain operations in India over the next 3-4 years.
A DHL spokesperson declined to respond to a detailed questionnaire but said the company may share more details early next year.
“India is an important and strategic market for DHL, and we will continue to invest and transform our logistics presence to keep up with the growth momentum we see. We are constantly looking for ways to grow our service offerings for our customers, and will be happy to share details when new developments arise,” said the DHL spokesperson in response to Mint’s email.
The logistics space offers significant potential for value creation and the sector is seeing some major disruptions from an infrastructure, policy and technology standpoint, an industry expert said.
“We see many new players and start-ups trying to capitalize on this opportunity. But, it is also a good setup for traditional logistics players to re-evaluate their business model and plan for breakthrough growth,” said Mayank Bansal, Partner, Transportation and Infrastructure, at consulting firm AT Kearney.
The traditional players will need to find ways to leverage their strong customer access and established network footprint to create a differentiated value proposition, Bansal added. Asset ownership will be a key decision point for players in the sector.
DHL, according to company executives Mint spoke to, has traditionally had an asset-light model.
That way, the new business plan is a clear departure from the same. Start-ups such as Rivigo “have demonstrated the merits of asset ownership in improving operational efficiency”, Bansal said. But owning truck fleets comes at a cost.
At Rivigo, buying trucks is a big expense. On 30 October, Mint reported that Rivigo’s annual loss widened to Rs137.1 crore in the year ended 31 March, from a little over Rs5 crore in the previous year.
But, the logistics space in India is currently very inefficient and conglomerates with good consumer connect and good value proposition for consumers can disrupt it in a big way.
Bansal explained, “If we look at the trucking segment—the average distance covered per day by trucks in India is 250-300km, less than half that in the US, where trucks cover approx.. 700-800km per day on an average. Our trucking fleet is also sub-optimal from an age and size point of view that leads to higher logistics cost and also higher emissions.”