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

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LOGISTICS

Speeding up DHL, FedEx: how

digital startups are rescuingthe
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.

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Taslima Khan

15 Oct 2019 7 Mins Read

(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 e-mails 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 and USD4 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 LogYcode has pulled off:

 Cutting down 12 steps for initiating a shipment — 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.

 The average number of invoices generated daily has increased to 181 from 158 a year ago.

 During January to June, 9,477 tonnes 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, and FreightCrate are challenging the
existing setup 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’s 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’s 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 Mohammed Zakkiria 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 only 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 measure a 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 ports and is now looking to

set up its presence at 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’s 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 a dozen 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.

For now, at least a promising beginning has been made.

(Graphics by Sadhana Saxena)

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