De­mon­eti­sa­tion Blocks the Last mile for Lo­gis­tics Star­tups

Firms re­struc­ture busi­ness due to fall­ing ecomm ship­ment vol­umes

The Economic Times - - Disruption: Startups & Tech - Payal.Gan­guly@ times­group.com

Ben­galuru: The re­duced ecom­merce ship­ment vol­umes due to de­mon­eti­sa­tion has seen mul­ti­ple last mile lo­gis­tics com­pa­nies scale down op­er­a­tions. Over the past few months, lo­gis­tics man­power com­pa­nies such as IKYA Hu­man Cap­i­tal So­lu­tions, owned by Quess Corp, G4S, and last-mile de­liv­ery com­pa­nies such as Wow Ex­press and Con­nect In­di­a­have re­duced the num­ber of centres. “All com­pa­nies work­ing on an em­ployee out­sourc­ing model took a hit. Be­tween Novem­ber and Fe­bru­ary, there was a 4045% drop in vol­umes from ecom­merce com­pa­nies,” said L Sridhar, founder of lo­gis­tics net­work com­pany Con­nect In­dia, which works with lo­cal stores and phar­ma­cies in tier-II and III cities and ru­ral ar­eas to cre­ate a part­ner net­work for de­liv­ery in th­ese lo­ca­tions. He added that the com­pany has scaled down op­er­a­tions from 95 cities and ru­ral re­gions to 45 due to the re­duc­tion in ecom­merce vol­umes and lower rates be­ing ne­go­ti­ated by ecom­merce play­ers in an ef­fort to re­duce burn­ing cash per de­liv­ery. “The vol­ume has come down from 1 mil­lion to 4,00,000 ship­ments per month over the last three months,” said Sridhar, adding that the growth tar­gets be­ing fol­lowed by the com­pany is now cau­tious. “We un­der­stand the sea­son­al­ity of the ecom­merce busi­ness and are now en­ter­ing into short-term con­tracts for the peak de­liv­ery sea­sons with the ecom­merce play­ers. The plan­ning of man­power in th­ese com­pa­nies is aligned to the peak. When our con­tracts end at the end of the peak sea­son, we are mov­ing our de­liv­ery staff to other ver­ti­cals such as agro or FMCG to en­sure that they are not out of jobs. We are do­ing this for the first time in the year 2016-17,” said Gu­ruprasad Srini­vasan, pres­i­dent - spe­cial projects and lo­gis­tics at IKYA. IKYA works with Ama­zon In­dia to pro­vide man­power for its lo­gis­tics op­er­a­tions. The last fil­ing for com­pli­ance by the com­pany with Ama­zon is dated April 2016. The group com­pany also owns ecom­merce last mile de­liv­ery ser­vice com­pany Dependo Lo­gis­tics launched in June 2016. Srin­vasan added that the ser­vice con­tracts un­der Dependo, based on per­for­mance of the de­liv­ery as­so­ci­ates, have not been af­fected by the fluc­tu­at­ing de­mand. G4S, which pro­vides de­liv­ery as­so­ci­ates to ecom­merce com­pa­nies on con­tract ba­sis, has also stopped work­ing with mul­ti­ple ecom­merce clients such as Ama­zon Trans­porta­tion Ser­vices, the cap­tive lo­gis­tics unit of Ama­zon In­dia since Novem­ber 2016. The com­pany had also sus­pended con­tracts with Flip­kart and Vector Ecom­merce, the main seller on the Myn­tra plat­form from 2015. “Ra­tio­nal­i­sa­tion is part of nor­mal busi­ness op­er­a­tions. We exit un­prof­itable and non-vi­able client con­tracts where com­mer­cial agree­ment could not be reached,” said a G4S spokesper­son in re­sponse to queries sent by ET.

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