Just a few years ago, when I wanted to watch a movie online, I had to make a great deal of effort to pick the…
Hello. Here’s a potato for you.
To many people, it’s something served at the meals we eat everyday. To some others, it is something we buy at grocery shops or supermarkets.
To an even fewer, it starts at the farms. (Everybody knows that. I just wasn’t preparing you for the frame of reference I intended.)
By simple physics, some force must have brought it from the farmers to the local markets near our houses. And to many of us at LOGIVAN, the force comes under the form of a truck.
According to WorldBank, in 2016, 77% of the freight volume transported in the country was done by trucks. That makes this trucking industry a giant 25 BILLION dollar meatloaf.
Yet nobody has been named the winner of this juicy market.
We have examined this question over 2 years. Here are the 3 answers that kept coming back.
From a cost perspective, it’s hella expensive to grow a traditional trucking business to scale
- Un-scalability. 90% of trucking companies in Vietnam own less than 5 trucks. The average cost for owning a truck (taking the medium truck weight of 5 Ton) is 35,000 USD. Drastically different from the taxi model where frequency of bookings is high, vehicle unit cost is lower and intracity distances only; it is extremely impractical to buy a large number of trucks and count on the ability to own the demand in different regions.
- The business is too demand-specific. Even locally, in order to accommodate demands within that region, one needs to own a variety of truck types since the need for specific treatment with different shipment types is strong.
From a service perspective, money is not well-spent
- Lose-lose business model. 70% of trucks, even if booked, return empty everyday. It’s a lose-lose business model: the trucking company can’t help but ask you to share the return cost, yet you have to pay for something that you don’t use.
- Surge charge due to layers of middlemen. One time we attempted to book a truck via the most traditional way we can think of, which was to pick up the phone and call someone. It worked, but the way it worked was horrendous. As conversation broke down with the driver we ended up hiring, there were 6 layers of middleman involve between him and the first person to answer the phone. 6. Jamie Foxx thanked even less people in his Oscar acceptance speech.
Imagine that each of these 6 brokers was merciful enough to charge us 5% commission only, what we ended up being charged is 34% higher than what we could have paid to have the same value delivered.
Lastly, from a control perspective, there is very little room for improvement
You can 100% sympathize with the fact that a truck traveling 1000 miles should carry with it a lot of risks, until that risk really happens, to you. (Replace “you” with “trucking business owner” or “customer”, the statement remains applicable.)
- Delayed communication. Everything is handled via phone calls, nothing is recorded anywhere. So after 12 hours of delayed shipment and detention penalty, who is to be blamed amongst the 6 middlemen and the truck driver?
- Damage control — down the rabbit hole. The inherent lack of visibility also forbids companies to plan ahead or to intervene timely should issues happen. When you hear about it, it’s almost always too late. We have heard stories of clients losing hundreds of thousand dollars due to a supposedly simple 1-hour delay from missing its export departure time.
Then, what can be done?
The problem is long but the solution is simple.
We need someone that provides a lot of trucks in a variety of types to accommodate any type of demands, distributed everywhere that can give you 100% visibility of the trucks with 0 layers of middleman and doesn’t charge you for what you don’t request.
LOGIVAN is trying to do just that.
As of September 2019, LOGIVAN has a 44,000-trucker fleet distributed in 64 provinces across Vietnam with every single type of trucks — ranging from reefers to dry vans. That gives us the full capacity to address any kind of demand the market should have.
But that’s just the first step. In order to solve the problem thoroughly we need more than just a long list of truckers. LOGIVAN is leveraging the vast amount of data available on the trips, truckers and shippers’ behaviors to make booking a truck as seamlessly and hassle-free as possible, while tremendously cut down the cost.
This post is just the first piece of a series on the way we’re tackling this industry’s puzzles. Coming up next:
- AI model to match the best possible truck to an order
- Realtime data track and trace of every truck in motion to give shipper 100% visibility on their trips
- AI model to reduce inefficiencies in cost calculation
- Return trips optimization capacity
- Load optimization for less than truckload requests
- Shipment categorization for better cargo treatment
These for sure aren’t easy challenges — but that’s exactly why they are so enchanting! We can’t wait to share more about what’s in the pipeline. Stay tuned for the upcoming posts, more on potatoes is on the way!
We’re excited to join the blogging community to share and listen to novel ideas. Don’t hesitate to reach out at [email protected]