In the past few years, there has been an increasing interest in tech-driven logistics networks, aka digital freight networks. Traditionally shippers and logistics service providers have operated within a disaggregated network relying on supply-side brokers for match-making between demand and capacity. Low fulfillment rates, inefficient use of available assets, higher freight transportation rates, empty miles, low load-rate percentages are some of the major issues the transportation industry faces. Does adoption of digital freight networks have the potential to solve these challenges? Let’s dive deep!
The combination of problems with traditional freight networks has constantly plagued the logistics industry and diverted the attention of business owners from their core businesses. Let’s first look at the current scenario and the problems associated with it.
The truck business in India is highly fragmented and unorganized which leads to great inefficiencies. National Skills Development Corporation sources suggests that about 75% of the truck supply is done by small owners (with five or fewer trucks) and similarly large part of the market comprises small and mid-sized transporters.
The traditional practices have created a limited circle of trust. Shippers and transporters restrict themselves to do business within their localized or personal circles as there is a lack of systematic information on the identification of reliable partners for doing business.
Match-making between supply and demand is highly dependent on brokers. Shippers depend on brokers to facilitate the transportation of goods from point A to B. Fleet owners depend on brokers to get loads for their trucks. Needless to say that there is brokerage involved in these transactions.
The traditional model works on the flow of information within localized and personal circles. Due to this, shippers and transporters often lack information on the availability of the right trucks needed to fulfill. Similarly, fleet owners lack information on load availability and adequate information to explore new routes.
Traditional freight network relies heavily on manual processes. Most deals are coordinated by endless phone or WhatsApp messages, taking hours or days to confirm. There’s also no guarantee that all the stakeholders will come under one roof to choose each other.
The whole process of truck procurement lacks transparency. There is no information on market variables like fuel costs, market demand, driver shortage, capacity crunches, market prices, etc. There is also a lack of information on the performance and service deliverability of transporters and fleet owners.
1. Delays in Truck Procurement
Due to a lack of efficient communication channels between shippers, transporters, and fleet owners, there are often delays in the truck procurement process which increases the overall delivery time.
2. Inefficiencies in demand and supply matching
Due to lack of connected network and real-time information, the assets are often under-utilized. Shippers find it difficult to find transporters and truckers due to the limited network. Trucks often remain idle for days due to a lack of availability and information on loads. Truck capacities are often mismatched with demand.
3. Empty Miles
A KPMG report estimates 9 million trucks in India out of which only 4.5 million are currently plying in the country and RMI India’s report mentions empty running rates as high as 40%. The truth is that shippers/transporters don’t buy miles from their fleet owners; they buy round trips. And if shippers/transporters are unwilling to pay for the higher cost, sometimes fleet owners are forced to do the business due to lack of availability of options.
4. Effect on OTIFs
OTIFs which are one of the key metrics to measure supplier’s performance can take a serious hit due to these issues. Not being able to find a reliable partner can result in major issues. The freight could experience delays due to stoppages and detentions, accrue unexpected charges, or have an incident of some kind that can give nightmares to the shippers. These can severely have negative effects on OTIFs and result in a poor experience.
5. Limited Business Growth
Limited connectivity of the network and lack of information can hinder business growth. For instance, due to lack of information, shippers struggle to find cost-effective rates which can affect their bottom line. Similarly, due to limited networks, fleet owners can never get a chance to explore new routes.
6. High Costs
Lack of pricing transparency, dependencies on brokers, inefficient demand/supply matching, and lack of alternatives for loads on desired routes or suitable trucks increase the cost of the whole transaction. Also, empty miles and trucks being idle for days result in higher fuel cost, lower revenue per kilometer, and higher truck maintenance charges and ultimately affects the profitability of businesses.
Digital Freight Network is an open fully connected centralized marketplace which brings together shippers, transport companies and fleet owners under a single roof making it easier for them to connect, communicate, and collaborate directly. As the network grows, the information flow allows shippers and LSPs to improve their businesses. To understand it in detail, we need to first understand the three major pillars of Digital Freight Network.
Free flow of real time information is crucial for a network to operate efficiently. The centralized platform allows information visibility to all the stakeholders. Real-time information is available on demand and capacity. The network also collects thousands of data points to assess the past performance of key stakeholders whether it be transit times, loading unloading time, or service levels.
Since all the relevant stakeholders are on one platform, it can help faster and wider flow of information. With a digital freight network, a shipper can publish demand to an entire network of transporters and truckers. Similarly the visibility to the demand can allow transporters and fleet owners to participate in getting the contracts and provide their services. A connected community of thousands of shippers, fleet owners and truckers has potential to unlock endless opportunities.
Digitisation and advanced tech can improve efficiency significantly. The availability and effective usage of data can help in identifying demand and supply patterns. Technology can also help in weeding out manual processes of communication. The technology can help in planning, route and capacity optimizations, real-time visibility, reporting and even in faster payments and settlements.
The above-mentioned pillars can significantly improve the vehicle sourcing time. The reduced dependency on brokers and efficient communication mechanisms with the help of technology can result in faster and higher fulfillment rates.
With Digital Freight Network, trucks are available in tough circumstances whether it be late-scheduled emergency shipments or fleet requirements on low volume lanes or speciality high-value freight. Efficiencies can also be achieved by aggregating demands from multiple shippers for partial loads.
Accumulation of a large pool of demand and supply at one platform and the flow of real-time information can allow an efficient matching mechanism that has the potential to eradicate the issue of idle trucks and empty miles. This can result in higher revenue per kilometer, better truck utilization, and improved business performance.
Digital Freight Network can provide a level playing field for all the stakeholders by allowing them to participate in freight bidding. This creates an opportunity to get fair market rates for freight.
The network also collects thousands of data points to assess the performance of key stakeholders. The delivering correct service level and improving it continuously can help each stakeholder derive more value from the network which creates an environment and trust and reliability.
Sustainability has been a hot issue for all industries. An increase in consumer awareness coupled with climate change has pushed governments and corporations to take proactive steps. In a report released by NITI AAYOG, RMI, AND RMI INDIA, CO2 emissions in June 2021 state that road freight is the biggest contributor to CO2 emissions in India, responsible for 95 percent of the freight CO2 emissions in 2020. The report also mentions that 2.7 Gigatonnes of CO2 or INR 85 lakh crore could be saved by focusing on reducing empty miles capacity optimization and route optimization. Digital Freight Network is a cost-effective, clean, optimized freight transport alternative that provides higher utilization of assets and lower carbon footprint simultaneously.
The technological foundation of the Digital Freight Network empowers consignors, transport companies, and fleet owners with faster procurement of freight, improved visibility, better utilization of vehicles, increased margins, and business growth for all. Faster and reliable transport of goods ultimately results in better OTIFs and higher customer satisfaction.
Driving end-to-end transparency with connected communities, holistic decision making, and effective use of technology and automation can significantly bring down costs and improve OTIFs. Freight Tiger has been successful in building a liquid marketplace to enable efficient and on-demand matchmaking. Our SaaS-enabled marketplace gives real-time data at depth & scale and brings 100% visibility and digitization. To explore more and book a demo click here.
Published on 17 May 2022
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