Rohit Fernandes, the founder of Shippr, is formally educated in supply chain management and has worked in the logistics industry. Now, he wants to bring in all his experience to solve the intra-city cargo transportation problem
Rohit Fernandes comes from a family of transporters. He has heard his father (who has run a logistics firm for the last 40 years) refuse customers who approach him for local logistics because he believes it’s not an easy job. His main issue was that vehicles were not aggregated and to get 50 vehicles, one needs to talk to at least 40 vehicle owners as most of them have hardly 1 or 2 vehicles.
This apart, according to him, most of them were not reliable as they were single vehicle owners and everybody was their own boss. This naturally led to price variation from driver to driver. These operators were fragmented and market dynamics also didn’t affect them, as they had no visibility of the demand outside of their areas. That’s when Fernandes saw value in this segment. “I soon realized that with the increase in ecommerce delivery density, rapid urbanization and improvement in standards of living, the intra-city logistics space would boom. But, for that the industry had to be organized,” states Fernandes.
Fernandes, who did his Masters in Supply Chain Management and Logistics, has worked for 3663, a BFS Group Company, which was one of UK’s largest food supply chain company where he handled a budget of ?20 million. His last project was the London Olympic and Paralympic Games, 2012. While he has the domain knowledge, his co-founder, Phaneendra Hegde, comes with experience in software development and coding. “He is unofficially rated the top 10 programmers in Karnataka by PESITians,” says Fernandes.
Together, the duo is planning to transform this unorganized logistics sector through Shippr, which they set up in September 2014. Using technology as its backbone, this intra-city aggregator organizes the logistics system, packages it and presents it to the consumer in its simplest form. The company’s first product, the MiniShippr, is a disruptive local logistics solution aimed at deliveries within Bengaluru. It also helps single vehicle owners (vendors) reduce their idle time by 40 per cent, thereby increasing profitability and quicker vehicle turnaround.
Be it movement of furniture or heavy machinery around the country, the company aims to find a solution for all. At an industry level, the logistics industry is filled with labourers and cleaners, who live in very harsh conditions. “These people are the central nervous system of our country’s supply chain operations and it is important that they are looked after,” states Fernandes.
As far as its revenue model goes, the company gives the vehicle owner business and takes a percentage of the transaction value as its margin. Its pricing to the customer is based on the distance and time taken for the vehicle to reach them.
The market dynamics
The size of the logistics industry is approximately US $120 billion to US $150 billion currently. The small commercial vehicle segment is expected to grow at a CAGR of 13 per cent till 2020 (according to Roland Berger report). The sector currently has around two million Tata Aces alone in India and the market for intra-city movement is around US $10 billion. “We see a lot of our demand coming from large ecommerce companies and enablers,” states Fernandes. The fact that the reach for Internet has widened and there has been a rapid urbanization has led to an increase in the density of deliveries with in a small radius. This means that a delivery for which bikes were used is now being replaced with commercial vehicles. “Also an increasing trend among consumers is to buy used goods, like furniture for example, which will by default need at least a Tata Ace vehicle for movement from the buyer to the seller,” observes Fernandes. This is just reassuring the demand in the market.
However, this sector is also burdened with multiple challenges. To name a few, illiteracy, lack of training and most importantly lack of work discipline are burdening it heavily. This apart, supply is spread across the geography of the city with less or no visibility to the demand around them.
Talking about which sector, Fernandes believes that there is a larger scope for last mile connectivity. “You might have a warehouse or a cold storage but have you clustered and consolidated it right. The way I see it, setting up the warehouse and consolidating items is the easier bit. The real value is in controlling the supply capacity effectively using technology,” states he.
Getting down to business
Anyone who requires a vehicle is the company’s target audience. However, currently 60 per cent of its volumes come from businesses and the remaining from consumers, as intra-city transportation is a major pain point for both of them. The company is currently operating in Bengaluru and Chennai and will soon be expanding to New Delhi and Hyderabad. “Though our current round of funding gives us a runway, we are in talks with several VC’s to close a much larger round,” says Fernandes about the funding.
The company caters to both the B2B and B2C segment and has targeted marketing activities for this segment. In the case of the B2B side, its strategy is more feet-on-street and digital media marketing. “We don’t just provide them with transportation services but give them a complete logistics platform that is integrated with their systems,” states Fernandes. As for consumers, it is mostly digital media and word of mouth.
The challenge that it is facing currently is short supply of containerized vehicles as they run mostly for institutions. “Secondly, we are training our drivers to use our devices which need to be done periodically to ensure that they get used to it,” states Fernandes. In fact, today technology is being used by the logistics industry for better visibility through the supply chain. “But any technology without implementation and training is useless,” opines Fernandes. The most basic thing it would do is help you track the vehicle and more importantly, it will help match demand and supply. It will help the user to track the driver, have complete transparency and accountability within the supply chain to having features like geo-fencing, route planning, load optimization, dynamic pricing, invoicing and analytics.
For Shippr, technology plays a very important role as it gives the driver visibility to the demand thus matching both demand and supply.
The company recently received funding to the tune of US $500,000 from i2India Ventures. Shippr aims to use these funds for customer acquisition, geographical expansion and strengthening the supply network.
The path ahead
The company is operating in a very fragmented sector with a lot of competition. “What makes people choose us over them is our use of technology to enable logistical operations. Technology gives the end user convenience, reliability and visibility,” states Fernandes.
Evidently, this has led to a good traction in the business for Shippr. “We are currently doing a run rate of 3,000 transactions a month and intend to hit 1,000 transactions a day very soon. That’s the short term goal,” shares Fernandes. The company is so far functional in two cities, and will be entering two more cities very soon. In the next three years, it aims to be an organization that touches every consumer with business in every Tier 1, 2 and 3 cities and to leverage technology to build a formidable supply network. Fernandes believes that a revolution is waiting to take place in this sector and it’s a matter of time before the sector gets organized. He believes that two things will organize it: use of technology and a trained, responsible work force. And Shippr is ready to bring about this revolution!
Founders: Rohit Fernandes and Phaneendra Hegde
Year of Incorporation: Sept 2014
Funding: US $500,000 from Venture Factory, an arm of i2India
Company Profile: Using technology as its backbone, Shippr is an intra-city aggregator of Tata Aces. The company’s first product the MiniShippr is a disruptive local logistics solution aimed at deliveries within Bengaluru.