Project II

Final Submission

 

Sustainability of
Rivigo’s Business Model in Indian Logistics Industry

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Sapan Bansal (40271) | Suraj Sipani
(40288) | Srikant Yadav (40292)

 

We, as a team of 3, have attempted to explore the
suitability and sustainability of the Rivigo’s Business model in Indian
logistics industry. Logistics value chain majorly consists of 2 key activities:
Transportation and Warehousing. Our study focuses on the transportation part of
logistics.

We have used the SAPLAP (Situation, Actors, Process, Learnings, Action,
Performance) model for studying the case in hand.

 

Situation: Rivigo is an emerging startup in the Indian logistics space
which has leveraged technology to bring a transformative change in the way a
trucking company operates and in order to match with the transportation
requirements of the rapidly growing logistics industry.

 

Logistics industry in India is at a nascent stage as evident
by (Das, 2014). Though the Logistics sector is India growing positively and is
projected to grow at a rate of 9-10 percent over the course of next few years,
there are certain bottlenecks which continue to impact the industry negatively.
Poor road transportation systems adversely affect industrial competitiveness by
raising the unit cost of freight. Currently, India spends around 14.4% of its
GDP on logistics and transportation as compared to less than 8% spent by the
other developing countries, according to a report by Assocham (May 2016).

 

Also, the rate at which road infrastructure is getting developed is inadequate when comparing it with the other developing nations. In India, the targets for the construction of road is done with keeping in mind China as the benchmark to shorten the existing gap in the country. When it comes to road infrastructure, India score 3.2 as compared to the world average of 3.7. Even countries like Guatemala, Pakistan and Botswana are better than India on this front.

 

Rivigo, founded in 2014 as TrucksFirst, disrupted the Indian
logistics sector with its unique “driver relay model” and cutting-edge advanced
technology. Currently, Rivigo has a fleet of 2100 connected trucks (as on July
2017), 4000 pilots and 70 technology enabled pit stops that can check
everything on real time basis.

 

 

Actors:

 

1. Drivers

Drivers are one of the major stakeholders in the
transportation industry of any country. In India, where there is a requirement
of a million truck drivers every year, industry faces an acute shortage of
truck drivers especially for the long haul transportation. There are many
reasons for such shortage that need to be addressed. In the conventional
business models of transport companies, drivers often drive for prolonged hours
on poor conditioned Indian roads and highways in badly maintained &
uncomfortable trucks. They are away from their home and family for number of
days in a month, as high as 25 days and have to work under stressful
conditions. This results in many of them resorting to substance abuse such as
drugs, alcohol etc. and getting infected with diseases such as lung infection
and HIV. Truck drivers in India consider themselves as the 37th caste, one of
the lowest in the social system and find it difficult to get a suitable
marriage proposal because of their perceived low social status and undignified
life.

 

2. Government

Initiatives have been taken at the government level to
support private sector participation in the road sector in India. In an order
to tap both domestic and foreign equity and debt?market,
the government of India underwent number of reforms. It relaxed the regulatory
policies, reduced foreign investment restrictions, and introduced number of
tax, customs and other incentives for companies engaged in infrastructure
related activities. It declared the logistics sector as an industry by giving
it infrastructure status, allowed duty?free imports of certain identified high quality construction
plants and equipment, allowed foreign direct investment up to 100 per cent in
road sector, higher concession period up to 30 years and made provisions for
the right to collect and retain toll.

One of the major policy change that the Government of India
has done which is going to impact the Logistics industry positively is the
implementation of GST (Goods and Services Tax, 2017). As a result of this,
supplier companies will now plan their logistics framework on the fundamental
principles of demand & supply, proximity to customers & distribution
channel partners and costs. This means that instead of having a number of
warehouses in various states across the countries, companies can now have
strategically located consolidated warehouses to serve the customers more
efficiently along with reducing their overall costs. An estimate by the Rivigo
indicates that only eight regional logistics hubs will be required to serve the
entire country, which could potentially bring down a company’s total inventory
warehousing costs by around 40.This change will also require a major revamp in the
transportation services as now trucks will be covering more distances between
warehouses and the service points. GST will result in the removal of
border check posts at state junctions which will reduce the transportation time
as well as the logistics costs by a significant margin. “A KPMG study in 2010 estimated that a modern
transport system could by itself raise India’s GDP by 1-2%”.

3. Customers

Rivigo has already won major deals from private players such as Abbott,
Hero MotorCorp, ITC and Lupin for transporting their products. It has also
started transporting spare parts for Hero MotoCorp from Neemrana factory to all
across India. Also, it serves the pharmaceutical, automobile, apparel, and e-commerce industries, such as Amazon, Flipkart among others.

 

4. Investors

Since its inception in 2014, Rivigo has raised around $100 million, out of which $75 million came from private equity major Warburg Pincus late last year.

The company has raised about $ 40 million in largely equity
financing till date, from SAIF Partners, with a small component of venture debt
funding from specialty debt financing from, Trifecta Capital.

Rivigo has raised Series D funding of $50-million (approx.
 Rs 330 crore) from its existing investors Warburg Pincus and SAIF Partners

  

Process: The technology
division of Rivigo i.e. “Rivigo Labs” is at the core of Rivigo’s vision.
At the heart of the Rivigo Lab. Also known as Innovation hub, is its passion to
realize the hidden potential of Internet of Things or we can call it Internet
of Moving Things (IoMT) and it uses data sciences to build models for real time data driven decision making.

The problem at the center stage of Indian trucking industry is that it could not operate for continuous 24 hours as the driver used to stop after driving for 18 hours a day. Rivigo has rightly attempted to solve this issue by introducing the relay model. Also, the truck sensors are used as a monitoring tool for the fleet’s health. Mobile applications are being used for scheduling the drivers.

Every Rivigo truck is fitted with at least 3 sensors to monitor fuel consumption and major parameters of the vehicle such as GPS location, level of engine coolant etc. Also, each operator has a smartphone app that automatically clocks them in when they get into a truck and keeps track of their hours and mileage.

 

Each driver drives 4.5 hours to the Rivigo pit stop, and hands over to another driver who again drives 4.5 hours to the next pit stop. The relay continues till destination.

The positive aspect of the driver relay system is that the
driver is able to be back home the same day which reduces negative health
effects of fatigue, stress and hypertension among others which he experiences
while driving a truck as per the conventional model.

 

Rivigo is the first company in India to file for three technology patents to track fuel efficiency, improve the pilot relay system and automate loading plans to reduce instances of damage.

 

 

Learnings: We have figured out 3 major parameters that influence the Indian
Logistics (mainly trucking industry) which are as follows.

·         We have gone through 5 research papers hovering around the “impact of the technology in enhancing the logistics moving on the road”.

·        
We have covered 5 research papers on the emotional aspect of
the drivers and studied what made them so disheartening and unwilling to stop
working in this industry.

·        
Also, we have studied 5 research papers highlighting the
various factors impacting the Road Transport Infrastructure in India.

 

We have also tried to identify the gaps that Rivigo is
trying to fulfil between the current standards of living of the drivers and the
quality of life they aspire.

 

Study of the mentioned research papers gives an overview of
the various challenges present with regards to the three parameters under
consideration and also the trends that have impacted the road transportation
sector in the country.

Use of technology in trucking by providing an online
platform to match loads with drivers has replaced the problems associated with
conventional mode of trucking such as time and money wastage in procuring loads
and has resulted in improving visibility in the system and better utilization
of fleet (Witkowski, 2017). Using components of Internet of Things (IoT) such
as RFID (radio frequency identification) tagging, GPS enabled trucks and
vehicle telematics which form the basis of an integrated smart transportation
system allows for better fleet and route optimization as well as providing a
real time tracking status of the cargo (Trucking: The Lifeblood of the
Logistics Value Chain, AVENDUS Estimates).

Truck drivers are the galley slaves of the twenty first
century (Professor Michael Quinlan, University of New South Wales). Indian
truck drivers have to generally spend a large part of their occupational life
on the roads which include national and state highways with the quality of
construction ranging from properly engineered to poor ones. The long operating
hours coupled with long periods of sitting, inadequate rest, improper food
intake and sedentary lifestyle results in fatigue, stress and hypertension as
indicated by various studies (International Journal of Medical Research &
Health Sciences, 2017, 6(5): 126-129). This driver fatigue has detrimental
effects on their health & well-being and encourages them to resort to use
of bad practices such as drug and alcohol abuse which comes out as one of the
major causes of road accidents as shown in studies.

 

Action: In Indian logistics industry sustainability is even a bigger
challenge than improving operational efficiency. Rivigo is working with a global team of Wabco (Belgium based global supplier of technologies and services to commercial vehicles). Wabco’s anti-collision devices have been installed in some of the trucks on pilot basis to check how they work on Indian roads. The company is going to do trial runs on the Delhi-Mumbai route.

 

There are some private players including but not limited to
DHL etc. which are planning to copy the relay model of Rivigo in their own
business. Rivigo will have to be on its toes when it comes to be unique in
providing services. Rivigo, being a technology based startup, has been working
continuously to improve its tech capabilities.

Rivigo’s USPs include its unmatched emphasis on driver
satisfaction and training, the high reliability of its services, thanks to 24X7
service network, its immaculate documentation systems, quick response time and
impeccable crisis management infrastructure as well as holistic client
servicing.

 

Performance:

Focusing specifically on trucking industry in the country,
we observed that poor quality of service is associated with low freight cost.
Trucking freight rates are so low that sometimes truckers make losses as per
(Sahu, 2017). The trucking industry in India largely comprises of truck owners
carrying 6 or less than 6 trucks. According to (Naik, Sharma et al., 2016)
since India’s transportation model is heavily skewed towards the road (60%
road), it will pose big opportunity in front of a tech-based startup like
Rivigo.

With the help of Internet of Things, It has enhanced the
operational efficiencies to a level where delivery time is 50%-70% less than
its competitors while delivering its customers a customized, dynamic, and
automated service. For example, Delhi to Mumbai typically takes four days for its competitors while Rivigo takes 24 hours. Delhi to Bangalore (Bengaluru), it takes eight to nine days, while Rivigo does a third-day delivery. The delivery time for Delhi-Chennai is cut from 96 hours to 48, and for Bengaluru-Kolkata from 110 hours to 44. This is twice the speed of some courier companies, and maximizes truck utilization. The firm, claims that based on its innovative ‘drivers relay system’, truck loads are delivered to Chennai from Delhi in two days instead of conventional eight days.

Rivigo’s clients leverage its reduced Turn Around Time (TAT) and reliability to reinvent their business models – serving new markets, reducing inventory and significantly cutting down the cost to serve their customers. The unparalleled value that Rivigo has brought to the table for its clients is finding tremendous traction with companies.

The relay system promises to make a once-despised occupation respectable and desirable. It can end today’s chronic shortage of drivers. Rivigo offers salary of 24000 Rs. a month to the drivers which is twice the minimum wage paid to the workers in the state of Haryana.

India has risen from 54 in 2014 to 35 in 2016 in Logistics Performance Index which is World Bank’s measure of international supply chain efficiency. The credit for achieving this milestone goes partly to the emergence of organized players like Rivigo.

 

 

References:

1. Kaklamani,
Inden et al., 2017, An Intelligent Trucking Operations Management System

2. Witkowski, 2017, Internet of Things, Big Data, Industry
4.0 – Innovative Solutions in Logistics and Supply Chains Management

3. Naik,Sharma et al., 2016,
Logistics-tech-re-architecting-the-nervous-system-of-the-economy

4. Yoshimoto, Nemoto 2005, The Impact of Information and
Communication Technology on Road Freight Transportation

5. Sternberg, Andersson 2014, Decentralized intelligence in
freight transport—A critical review

6. Ramamoorthy, Muthuraja et al., 2017, Factors Associated
with Hypertension Among Truck Drivers: A Cross Sectional Study at A Check Post
on A National Highway in South India

7. Sastry, 2015, Long Distance Truck Drivers and the
Structural Context of Health: A Culture-Centered Investigation of Indian
Truckers’ Health Narratives

8. Rangaswamy, Rudresh et al., 2016, Personality correlates
of accident-proneness in truck drivers passing by one of the state highway of
India

9. Bunn, Browning et al., 2005, Sleepiness/fatigue and
distraction/inattention as factors for fatal versus nonfatal commercial motor
vehicle driver injuries

10. Das, 2014, A Review of the Indian Logistics Industry and
Policy

11. Sahu, 2017, Trend, Growth and Problems of Road Transport
in India

12. Sharma, Vohra 2009, Critical evaluation of road
infrastructure in India: a cross?country view

13. Pel, Agatz et al.,2017, Technologies and control for
sustainable transportation

14. Fernandes V. (2016, August 23). Rivigo’s drivers pass on trucks like
relay batons, co-founder Deepak Garg says the productivity gain is a collateral
benefit. Yourstory, Retrieved from https://yourstory.com

15. Lakhera M. (2016). Transport Infrastructure for
Sustained Growth

16. Laha R. (2017, November 2). DHL looks to emulate Rivigo’s
‘driver relay’, location tracking models in India. livemint,
Retrieved from http://www.livemint.com

17. Pani P. (2015, December 17).  SAIF Partners infuses
$30 mn in Rivigo. The Hindustan
Business Line, Retrieved from http://www.thehindubusinessline.com

18. Mishra A.(2017, November 21).Logistics sector gets
infrastructure status. livemint, Retrieved from http://www.livemint.com

19. Shu C. (2015, December 18). Rivigo, An Indian Logistics Startup That Uses Tech To Ensure Driver Safety,Raises $30M Series B. TechCrunch Retrieved from http://www.techcrunch.com

 

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