Why Vehicle Guiding Solutions are the next big thing for Indian Logistics Sector

Vehicle Routing Problem (VRP) and its many versions like Vehicle routing with time window (VRPTW) have been challenging subject of research in the academia for decades. But the interest has blossomed by the sudden surge of ecommerce which has taken every traditional retailer with storm. Historically vehicle routing was more of a focused area around goods distribution from plants to warehouse and eventually to stores but that is not the case any more.

Routing problems can be considered as an important extension of location modeling and integration with modern GPS tracking software it is now possible to track and even amend the routes centrally while vehicles are in-transit.

Current Scenario

In contrast to developed economies where this concept has evolved multifold in recent past, countries like India are yet to come in terms with changing business scenario and how technology can help bringing cost-effectiveness in fleet optimization and improve time to customer. Its important to understand below scenarios first:-

1. Hub to Home Deliver – Most of the big retailers (BestBuy, Argos to name a few) are now offering same day home delivery or in extreme cases within 1-hr home delivery from the time customer places order on any of the digital platform be it web or mobile apps. In case of Whitegoods the lead time offered is as little as 24 hours

2. In-Store collection – Customers who don’t want to pay a little extra for home delivery or those who are mobile most of the time, technology offers them to place an order and immediately collect it from the nearby store. In case of a particular retailer in UK, the waiting time for such collection has been reduced to as less as 10 seconds

3. Hub-and-Spoke delivery – Item availability and lead time offered to customer is closely linked and hence most of the retailers are using hub-inventory as buffer to fulfil the demand generated at a spoke. The Hub-spoke concept is discussed in detail in the below blog https://www.linkedin.com/pulse/hierarchical-logistics-network-hub-spoke-formulation-consulting

All the above scenarios involve too much of goods movement both in terms of replenishment from Vendor to DC or DC to store and customer order fulfilment. Hence an abundance of challenging opportunity for optimization of routes is presented in front of route scheduling team which is centrally located.

Indian Context

It is a general belief that retail marketplace in India is still primarily driven by price discounts and customers are more than willing to wait for the item to get better price. But the cut-throat competition among major ecommerce players have already brought the prices at same level. Along with it, the new “Maharaja” in terms of spending are Millennials who have shown a different kind of buying pattern as contrast with traditional house makers. Buying is more intuitive now than ever and this new breed has shown immense loyalty for digital platforms so the patter is here to stay and grow.

One more stark contrast Indian ecommerce sector has vis-à-vis its western counterparts is too much tilt towards Supplier fulfilled model than to manage their own inventory. This looked lucrative in burgeoning years of Indian players where they wanted to pose themselves as more of a technology platform providing marketplace for sellers and buyers than being termed as ecommerce retailer. But this has changed significantly in last few years where customer satisfaction has hit rock bottom raising eyebrows on quality and delivery under such model. All major Ecommerce players in India also are enhancing their warehouse space significantly but they have a long way to go.

Future Opportunities

Technology has given immense power to buyers and have indeed made the retail business hypercompetitive. It is imperative for Indian ecommerce players as well to keep reinventing and innovating in order to stay relevant and efficient.

One such area can be integrating the delivery capacity with order management system and apply intelligence to achieve higher utilization of their delivery assets while offering better customer service levels. Changes in technology backend are significant and major integration work between cross system is required to achieve this. But once done, companies can start offering lucrative options to customers. Like at the time of the booking itself, customers can be offered a 2-hr delivery slot for a particular day (or the same day) or at least a AM/PM slot for same day. Main objective of such project should be reducing the lead time to customer and better utilization of transportation assets.

As mentioned before, all of this required state of the are route optimization software capable of doing dynamic scheduling and great integration effort. But the advantage and customer proposition it nrings forth outweighs the cost involved in implementing such systems. This proposition obviously should be extended to leverage better fleet utilization for vendor to DC to Store replenishment as well.

There are hardly few companies providing customized and highly efficient vehicle routing solutions customized for Indian scenario at the moment and even fewer logistics companies using such system to its potential even if implemented.

Logistics spending still remains at giant 13% for India as compared to 8-9% in developed economies. For a big nation like India and massive investment in the infrastructure sector particularly roads is hinting towards a big first-mover advantage for companies who appreciate the efficiency in operations which can be achieved by a better control and utilization of transportation assets.

Milk-Run Consultancy

https://milk-run.co.in