Technology to offset rising transportation cost

Frequent surge in transportation cost owing to its dependence on dynamic market elements such as fuel prices, toll charges, and vehicle ownership costs, has been a pain point for the cargo industry since long. However, a recent report by ICRA states that

By optimising routes for efficient delivery sequence, maximising asset utilisation and improving fuel efficiency, emerging technologies in the transportation sector, such as Big Data and telematics, hold the ability to offset costs, states a recent report by investment information and credit-rating agency ICRA. According to Shamsher Dewan, Vice President & Sector Head - Corporate Ratings, ICRA, the profit margins of fleet operators are highly volatile as compared to agents and thirdparty logistics companies. “The profitability margins of fleet operators are especially sensitive to fluctuations in diesel prices and frequent increase in vehicle ownership cost, toll charges, and other overheads. The sharp increase in diesel prices in Q2 and Q3 FY2019 had a significant impact on profitability indicators of fleet operators as freight rates didn’t move in a similar fashion owing to overall surplus capacity in the trucking system. In such an environment, gradual adoption of new technologies can help fleet operators improve their cost structure and bring down some of the fixed costs.”

With increasing acceptance of telematics and more importantly, emergence of technology-based start-ups in the logistics sector, route and network planning using technology is the buzzword in fleet operations in today’s world. With introduction of telematics in vehicles and software support at the back-end, new-age fleet operators can leverage technology to get live data on a truck’s fuel efficiency, speed of the truck, number of halts on the trip, reefer conditions (for cold chain transport), and number of instances when the truck door was opened. These data-points can be analysed and used for better route optimisation, network planning, improvement in fuel efficiency, and even maximising fleet utilisation. In the logistics space, another important change is gradually gaining acceptance. Several start-ups and aggregators are assisting small fleet operators to improve their cost structure by helping them source consumables such as tyres, fuel, lubricants, and sensors at competitive prices, by accumulating orders from several fleet bookings and negotiating prices with respective vendors. As a result, they have become instrumental in reducing the cost of operation.

Profitability margins of fleet operators are sensitive to fluctuations in diesel prices, toll charges, and other overheads

That said, several challenges such as poor infrastructure, lack of skilled manpower or acceptance of technology by drivers are hindrances. The government is taking several initiatives such as setting up a single-window logistics e-marketplace and a logistics data and analytics centre for penetration of technology in the sector.