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Welcome to shipX blog, a place where we will discuss how new generation technology solutions, especially shipX’s SaaS based collaboration platform can help small, medium and large shippers and transporters and act as catalyst in transforming Indian logistics industry.

Constraint Optimization and Solvers

Business problems often involve, optimizing profit, cost or efficiency while not violating inherent constraints. Techniques to solve these kind of problems are extensively researched in the field of artificial intelligence and several algorithms are publicly available to solve these type of problems. But, being NP Hard problems (meaning solving them algorithmically may not be possible in polynomial time) , these generic algorithms are often combined with heuristics to find reasonably good solutions in reasonable time.

Constraint solvers are the tools that help model constrained problems and provide ways to navigate through the solution space while honouring the problem constraints. They would also generally provide hooks for programmers to heuristically guide the solver into exploring interesting areas of the solution space. An example of such a solver contributed by Venky (Co Founder and Architect at www.shipx.in), can be found at https://github.com/venkatramanm/csf.

At shipx, we combine the power of constraint solver technologies and clever heuristics to solve important logistics problems such as Load Tendering. In situations where volume of your shipments is high, it is a very difficult and tedious process to manually determine the transporter for each and every shipment. You may have contracts with multiple transporters for different lanes, types of vehicles, services etc. Manual assignment is prone to errors and will not result in correct and optimal assignment of transporters and vehicles.

Load tendering algorithm can look at all constraints such as services offered by transporters, lanes supported by transporter, capacity constraint, allocation of load based on quota, vehicle permits and various other factors. By considering these constraints, algorithm can be tuned to allocate load to transporter to get lowest overall freight charges across all loads. This would bring transparency in allocation and also results in savings in freight.

Customizing Reports

Report customization capability is critical when enterprise solutions are offered in the cloud as SaaS (Software as a Service) model. In SaaS environment, a single instance hosts many customers and no two organizations will have the same reporting requirements.. It is not feasible to design and build reports that are simple to use while meeting the requirements of all customers. The complexity increases when considering many categories of users (corporate users, customer/vendor users etc) associated to a single organization as it is typical in a collaborative application like shipX.in.

In traditional On-Premise model, this is addressed by providing an extensible reporting framework as part of the software. Using the framework customers can build their own specific reports (at considerable cost) during the implementation phase. But the cost (time and effort) of building reports from ground up for each organization is not practical in SaaS environment where customers are onboarded fast.

Keeping this in mind, we have enhanced the reporting capabilities in shipX.in. The end users can now define their own reports easily by customizing the base reports. The new features include abilities to

  • Format the display of the report output by choosing the columns to display, the display order of columns and the sort criteria for the records
  • Save criteria and formatting information for regularly run reports
  • Share saved reports with rest of the organization

Why a Freight Exchange is necessary to transform Indian Logistics Industry

Domestic freight industry in India is huge but inefficient. It is extremely unorganized and also fragmented. There are around 2.75 lakh registered transporters in India and most of them are small and regional players. Moreover, numerous brokers and fleet owners are also involved in the value chain. There is significantly big single driver owner community as well.

There are a lot of inefficiencies in the value chain due to

  • Lack of information to match the demand and supply
  • Working capital finance from money lenders and private financiers which is very expensive
  • Under utilization of vehicles (significant waiting time at brokers location, loading and unloading locations)
  • Lack of information related to service rating of transporters

An organized freight exchange where in shippers, transporters, brokers and fleet owners can participate will definitely bridge the demand and supply mismatch, bring efficiency in the entire chain and thus transform the entire logistics industry.

However, previous freight exchange initiatives in India have failed to take off. One important criterion for an exchange to work is the active involvement of both seekers and providers. An exchange can flourish only when there is significant demand and matching supply on it. But achieving this (tipping point) is not easy and hence presents a chicken and egg problem. Let us first see the key reasons behind past failures:

  • Inadequate leverage of technology such as Internet and mobile phones
  • Trying to dis-intermediate specific participants in the value chain without clearly understanding its impact
  • Not being a neutral exchange, since exchanges were owned or funded by specific companies in the value chain
  • Shippers’ preference to deal with known set of transporters and not risk sending consignments through unknown transporters

Exchanges enable collaboration and hence create synergy. But in my opinion, for any freight exchange platform to succeed, it is important that each participant (Service Providers and Service Users) derives value from the exchange platform on a stand alone basis. It will be a natural extension for companies using exchange platform for stand alone benefits, to participate in an exchange to collaborate with other participants and derive value from network effect.

This realization leads us to conclude that a workable exchange platform must cater for slow adoption and be sustainable over the adoption time. Therefore, the principles that are critical to establishing such an exchange are:

  • Providing benefits on a stand alone basis by means of consolidation, route optimization, effective load tendering and other similar capabilities
  • Providing value to participants by simplifying day to day operations and provide a platform to migrate from their current annual contract model to exchange model on an incremental basis
  • Rating of service providers based on service quality and not just based on freight charge
  • Allowing interested participants to form “private exchanges” and collaborate amongst themselves in a secure fashion
  • Letting private exchanges to gradually evolve into public exchanges.

Technology has transformed the way business is done, and certainly it is going to be a key component for a freight exchange as well. At the same time, technology must be supported by strong operational capabilities to ensure service quality and consistency. To summarize, with the current technology penetration, freight exchanges with right approach will definitely succeed and unleash the potential value by bringing efficiency in the logistics value chain.

Technology for Indian Transportation Industry

In past two years, I have met a lot of Indian transporters. The very first thing which I noticed was all of them seem to be extremely busy. Everybody spends most of his time on phone chasing some loads, providing quotes to customers, tracking what happened to delivery of a truck and so on. From dispatch clerks to senior managers, in my opinion, keep working in a reactive mode. There is very little planning and lack the proactive steps required to improve the operational efficiency.

One of the other important issues I have observed is that the information is held with few people. Due to lack of processes and systems in place, most of the transporters fail to promptly provide shipment information to their customers (consignor or consignee) and at times, their own people need to call and chase specific people to provide this information to customers and higher management. Lack of efficient systems and processes prevents them from providing good customer service and restricts them from scaling their operations smoothly and quickly.

Most of the transporters, in spite of having grown their business across geography with numerous branches/offices, use very little or no technology to manage and control operations. Their current technology usage is primarily focused on managing the payment/invoice and not on managing day to day operations. Hence, transporters find it hard to ensure consistent service to all their customers across all branches.

Indian Transportation industry is extremely fragmented. There are thousands of small and mid size transporters who cannot afford to spend time and money to implement enterprise solutions. Enterprise solutions that are available are either too expensive and cost prohibitive or are built for bigger transport companies. Moreover, enterprise solutions often require very time consuming implementation cycle. This is one of important reasons why technology adoption in the industry has been very slow.

In the last 5 years, internet penetration has increased significantly. Many of these companies started using SaaS (Software as a Service) based Transportation Management Systems (TMS) which are offered on a monthly subscription basis and hence do not require heavy upfront investment (time and money) for the technology. This also means that companies don’t have to worry about IT staff to manage servers, database etc. With the mobile penetration, simple Mobile app and SMS can be easily integrated with business processes.

It definitely makes sense for small and medium size transporters to evaluate SaaS based TMS solutions before going in for custom built on premise TMS solution.