How LOBB is creating information symmetry for lorry drivers and transporters
Founded by a team of ex-logistics and tech experts the company believes it can organise the trucking industry, which is fragmented, and make inroads into the $200-billion logistics industry.
Ramana Gowda makes a living by ferrying vegetables from the mandis of Kolar in south-eastern Karnataka to Hyderabad in neighbouring Telangana in his 15-tonne truck twice a week. He gets his business from a local transport agent, who, in turn, is contacted by the transport company entrusted by the retailer with the delivery of vegetables to Hyderabad.
In this entire chain of picking up produce from the mandi and and their delivery to the retailer, only the agent makes money, netting about 15 percent of the delivery cost, while the driver makes only 10 percent and the rest is made by the transport company. The cost of one-way 550km trip is Rs 20,000, and this weighs heavily on those involved in the trade partly because the truck returns empty. The chain is only responsible for one-way trip. On his way back, Ramana contacts an agent in Hyderabad for a payload for Kolar, but this seldom happens.
The cost per km works out to Rs 30 as the vehicle returns empty or is halting for long periods during the trip. Now, here is the twist–the retailer either has to mark up the price of the product to take into account the high price of logistics, in an endeavour to make a profit, or he has to bear the loss by marking it down, because it is a category that brings footfalls to the shop. Now, some of you may be wondering how these costs can be brought down.
Enter SaaS startup Lorry Business to Business, or LOBB, which provides truck availability information, by region and markets, to transporters, agents and truckers. Using the information provided by LOBB, drivers like Ramana could charge as little as Rs 27 per km for the trip for forward and return journeys.
The founders, 49-year-old Jayaram Raju and 40-year-old Venu Kondur have built a system that captures data of consumption and markets, making it easier for lorry owners, transporters and agents to book loads across regions.
As we speak, the two founders are in Nammakal and Madurai in Tamil Nadu, speaking to truckers and associations in the region about the merits of using technology to increase their revenues. "Each day, trucks leave for Bengaluru and Chennai with full truckloads from these regions, and come back empty," says Jayaram, Co-founder of LOBB. He adds that this is the reason users ended up paying for a two-way trip instead of just for one leg of the journey. This is a problem across India, as 90 percent of the country's logistics is fragmented.
This became a problem statement for them, and the duo went about solving it with great enthusiasm and drive. They were in a good position to address the issue, with both coming from technical backgrounds and having worked in logistics, thus having an understanding of the problems faced by the industry.
India's logistics costs are the highest, at 13 percent of the product’s value, compared to only 6 percent in countries like the US. The US, however, is a different business altogether, with its supply chain largely tied to hyper markets or large 50,000 sq ft stores supported by manufacturers. In India, meanwhile, the story is very unique, thanks to its signature mix of small stores, small businesses, distributors, medium-sized manufacturing firms, and small land holdings.
The inefficiency in the chain exists because of the fragmented nature of information exchange between the stakeholders. This whole segment is not in to financial inclusion and runs primarily on cash. Team LOBB is trying to get this 13 percent logistics cost, which is cash driven, in to the digital digital banking channels and thus increasing the tax net in the country. Ankit Sethia, Founder of Hip Ship, says,
"When you distribute in India, what is missing is information and adoption of technology. Now, if one solves this, then there is a business for all parties concerned."
"Distribution in India is local for local, and is very unique. You cannot remove incumbents, but what you can do is convince them that the use of technology increases their margin," says Anish Basu Roy, Founder of Shotang.
Now, this is where LOBB is unique. It works with lorry associations that have 8.5 million truckers on their roles.
The early days
Jayaram started off in rural Andhra, and his early days have played a key role in shaping his ambitions today. "I had to walk five kilometres to school every day, and was in a Telugu medium school," he says. He says that being a farmer's son, he understood the way the agri industry worked. Through sheer hard work, Jayaram went away to the US and became a server side engineer in Fujitsu Consulting and Horace Mann. Although he became a US citizen, he returned to India in 2010 and joined the company True Logistics in 2011, setting up their technology architecture. He also worked closely with lorry owners, and it was at this time that he realised there was a problem in the industry - information asymmetry.
He jotted down the idea, and began looking at ways to begin the business. That's when he met Venu Kondur at a family function in June 2014. The two of them, childhood friends, became deeply intrigued with the idea of building a dynamic platform for truckers, transporters, brands, and agents. "We even believed that we could create the redBus of logistics, and that's how we built the company," says Venu.
Venu was a programmer in several software services companies, and had served stints in companies like Dell as well and was in the leadership team at Fidelity Information Services.
The two registered the company in January 2015, and began to build the architecture that could support the ecosystem. They went after the lorry owner associations, and signed up over 8,000 trucks, 400 large transporters, and 200 agents.
LOBB provides an app for the agent and the trucker. The agents have all the truckers on the platform, and when the orders appear for the transporter from the brand, they will select the agent and the trucker offering the lowest trip sheet. But the system does not end there, because once the trip to a destination is decided on, there will also be a load selected for the return trip. "The trucker does not come back empty, and the brand pays only for a single trip, unlike earlier," says Venu.
The company quickly raised $1 million from friends and family. In 2016, they closed at Rs 11 crore in revenues, which is the gross ride revenues. Today, they are well covered in Karnataka, Maharashtra, Andhra, Telangana, and Tamil Nadu, with plans afoot to go pan-India.
Of the 8,000 truckers on the platform, around 55 percent use the brand on a regular basis.
The company takes a small percentage of commission from the agents and the truckers. The only costs for the company lie in convincing the lorry driver associations and agents to use the brand. Modern delivery companies like Shadowfax and Rivigo can in fact use the LOBB platform for inter-city travel. "We are a technology company and work with all companies that handle physical assets," says Jayaram.
LOBB helps truckers, in Tamil Nadu and Karnataka, identify just-in-time-truck-loads, for agri produce, which resulted in 50 percent better price for them.
With 90 percent of Indian logistics being disorganised, LOBB is definitely a refreshing model that can map consumption and demand through trucking trips, and has the potential to scale up soon. Now, only time will tell if the truckers and agents take to using this technology. Only time will tell how far the Ramana Gowdas of the world adopt this technology, but the beginning seems bright.