In an interaction with Industry Outlook, Aqil Ashique, CEO of Driver Logistics, shares his views on the current state of the logistics landscape in India, the concerns in the logistics sector during market entry, and technologies that will shape the industry in 2024.
The private sector has undergone a significant transformation, with the emergence of new companies in the domain, particularly since the late 2010s. Now that we have a couple of unicorns in the logistics and tech spaces, these companies, as new entrants, have significantly enhanced the entrepreneurial atmosphere in the space. These companies indirectly inspired me during my college years. A considerable number of new individuals are entering the industry, and these individuals are bringing technology and information into the field. Fortunately, this influx contributes to a positive boost for the industry.
The government initiatives will drastically help these private players grow further. Especially in two areas, the government is making the input element quite efficient. For example, the travel time for a journey from Delhi to Mumbai, which used to take four to five days, is now coming down to less than 24 hours. So, road development and related infrastructure have significantly improved. These assets cover many weight classes, from BS2 to BS6, making them more fuel-efficient than ever. Moreover, the cabin quality has improved substantially, making it much better than before. So, these smaller, minor improvements in every area from each stakeholder will compound and make it easier for logistics players like us.
In contract logistics, there are two avenues for a new player to enter the field. One approach is to partner with existing logistics providers. However, there are numerous challenges in logistics, especially for smaller vendors who may lack sufficient working capital to kickstart their operations. As small vendors delve into contract logistics, they face the challenge of acquiring clients and conducting trials, often waiting 30 to 40 days for payment after billing for the services rendered. Managing operational costs during this period becomes critical, requiring a sustainable monthly budget. Scaling operations further poses another challenge. The hurdle extends to logistics financing, prompting the involvement of more stakeholders. The question arises: can solutions be developed to provide financing options for logistics, perhaps at a nominal interest rate of 1% or 2%? Introducing such finance solutions could significantly aid vendors' growth, fostering industry expansion. Effective vendor communication and collaboration will play a crucial role as the industry progresses.
Otherwise, it is challenging for small-time windows to expand this business. It is also highly labor-intensive, requiring drivers in the unit for pickups, necessitating thorough training due to the demanding nature of the work. To scale efficiently, digitalization is essential, especially for maintaining visibility beyond 10 acres. This involves the implementation of hardware, telematics devices, and other technological components, making the scaling process more complex. However, if you can secure funding or possess substantial capital to sustain operations for a couple of years, there is a chance for success. Without these resources, it is still advisable to approach expansion cautiously. As mentioned, the industry will likely remain fragmented, with single drivers or owners of two vehicles being the norm. Scaling is not an easy task. Nevertheless, in India, people comprehend and are more aware of the intricacies of logistics. As the economy grows, creating a demand for more capacity, there is an inherent need for the logistics sector to expand. With the economy projected to grow at a rate of 7% annually, the logistics industry must keep pace.
I am pro-technology. One positive aspect is that today's technology is more affordable and cheaper than ever due to the prevalence of plug-and-play models. Unlike in the past, where investing lakhs and crores was necessary for software, now partnering with a SaaS company or attending a webinar typically incurs a starting cost of Rs10,000 to 20,000 per month under a subscription-based model. Companies are adopting technology faster than ten years ago, particularly in the context of mobility. Applications and mini-applications are now accessible on the mobile phones of various stakeholders, contributing to an increasing trend in tech adoption each year. There is a keen awareness of the importance of technology among people.
However, the most challenging aspect lies with traditional companies, especially large ones entrenched in the industry for decades. The challenge does not primarily stem from technology procurement but rather from a training perspective. Training the existing workforce, which has been with the company for two decades or longer, poses a considerable hurdle. This challenge extends to enhancing technology and data literacy and developing an information strategy. Adapting to the changing environment is the most substantial challenge today. Even though we have customer and online portals, the difficulty lies not in building them but in encouraging regular usage among customers. Convincing customers to log in and check details rather than making a call remains a considerable challenge.
As we look ahead, younger generations entering these companies will demand more tech-centric solutions in the next few years. They prefer obtaining details through mobile apps rather than engaging in phone conversations. This shift represents an evolutionary perspective, indicating the intersection of technology and logistics. Our endeavor is to lead in this intersection, striving to achieve it ahead of others.