Shriram Transport buys 40% stake in Ashok Leyland arm August 21, 2007Posted by Ramnath Rangaswamy in Business, India, Indian Economy, Logistics.
Transport Exchange- long overdue in India
A truck exchange was a need felt for a long time but remained unfulfilled. The government initiated something but nothing came of it.
Like any commodity exchange the truck exchange brings the buyer – farmer, producer, manufacturer – and seller, who in most cases would be truck owner or a fleet owner, together.
The truck exchange reduces the cost of transaction, which in turn reduces the cost in the supply chain.
How does the truck exchange work?
The seller i.e. truck owner or fleet owner registers with the truck exchange. The seller will have to give details of his trucks- number, insurance, type, weight etc.At the time of registration, the documents pertaining to the truck- insurance, ownership- would be thoroughly scrutinized.
There would be a monthly/yearly payment as registration/ joining charges. The truck owner or fleet owner pays an annual/ monthly fees and after that he keeps all the money that he receives from the client.
How does the buying and selling happen?
When a client requires a truck, the client gives the details – date required, type of truck required, commodity, origin, destination, date of delivery, price range [which is not visible to the seller] – via internet or a toll-free number. This requirement gets broadcast via sms/ internet to the sellers i.e. registered truck owners and fleet owners, who then bid for the requirement. They give their quotes/bids via sms, toll-free number or internet.The client gets the bids and chooses one of the registered truckers and also 2 backups in case one of them do not land up. The sellers i.e. registered truck owners and fleet owners who are chosen [ 1 confirmed + 2 backups] are informed and the deal is sealed.
To visualize this process, think of the call taxis in Chennai, Bangalore, the taxi service in Singapore or Kuala Lumpur. The taxi driver constantly gets an update of customers waiting for a taxi. When a taxi driver finds a customer close to his location, he accepts the job and proceeds to pick up the customer.
Rating for the sellers
There should be a rating/ scoring system for the truckers. This should be based on the usual transport KPIs;
- reported in time,
- damages in-transit,
- delivered on time,
- feedback from clients,
- pro actively shares information when delayed/breakdown.
This KPI/scorecard should be filled up by taking feedback from the client either. The KPI/scorecard feedback can be taken via the internet or via a follow-up call. This will serve the dual purpose of getting the feedback on the transporter and give the impression of good customer service to the client. The scorecard can be a past 3month/6month history which is shared with the client when they request for a truck. Thus, a transporter with a higher rating can charge a premium. This is also an incentive for truckers to provide good service. Measures drive behaviour!
Marketing the truck exchange
To market the truck exchange;
- Ashley should give free registration and membership for Ashok Leyland customers who are buying new trucks.
- All truckers requesting for Finance should be members of the Transport Exchange. The tieup with Shriram Finance gives them another channel to sell the membership to the Transport Exchange.
The key to success of the truck exchange is scale and Transport Exchange must get as many members as possible in the shortest possible time.
Issues that will have to be faced
- Conflict with brokers: There is bound to be some conflict between the truck brokers and Transport Exchange. This will have to be handled.
- Infinite types of trucks: There are infinite types of trucks that ply the Indian roads. So a customer requesting for a truck might actually get something different from what he required.
- Creating an operating discipline: For example, a trucker bidding for the job but not turning up and not giving information. The ways to tackle this are (i) using KPIs which are shared with clients and (ii) having a backup where the client chooses 1 trucker + 2 backups.
Askok Leyland have done a great service to the industry- truckers and producers- by starting the Transport Exchange. Better Late Than Never!I wish them all the best.
For the complete story click on; Transport Exchange