When Deepak Garg, an ex-McKinsey executive, set out to do the homework before setting up a logistics start-up, he discovered that trucks drivers are branded as the 37th caste (he wasn’t even aware that India had 36 castes).
“I heard about it (the 37th caste) in Jaipur, and then in Hyderabad, in Vapi and also in Baroda... You may be financially underprivileged and blame your fate. But nobody would want to take up a career that makes him socially outcaste,” said Garg, who quit McKinsey in 2014 after a nine-year stint to become an entrepreneur.
Logistics seemed an interesting space to Garg as it lacked the application of technology. “I understood gradually that it is not just about technology but also about the people who are involved,” he said. He travelled to transport hubs, met drivers and accompanied some of them on long-haul trips to understand their condition. He found that most of them spent weeks and months away from homes in a rickety truck, in poor conditions. “A large number of them have HIVs with no family life. Many are unable to find brides”.
“See the boom in sales of commercial vehicles. As a country, we need an additional one million truck drivers every year and I don’t think many are becoming drivers,” said Garg. Estimates show that the country may end up having just 482 drivers for every thousand trucks by 2022.
Garg realised his logistics business, Rivigo (name derived from river on the go), can only flourish if he succeeds in improving the lot of drivers associated with the firm. Rivigo initially ran trucks for established logistics firms like Gati to get a first-hand experience of the business. E-commerce giant Amazon happened to become its first client when Rivigo launched its own platform.
Today Rivigo, backed by investors like Warburg Pincus and SAIF Partners, has about eight thousand truck drivers (Rivigo calls them pilots) on its contract to run its fleet of almost five thousand trucks. And it now counts names like Maruti Suzuki, Hero MotoCorp, ITC, Amul and Marks & Spencer in its list of over two thousand clients.
What helped Rivigo reach this scale? Garg, the founder and chief executive officer, resorted to a so-called relay model for running his large fleet of trucks. “A truck driver would hop on a truck to take it from Delhi to Jaipur, usually a four-hour trip. He would spend an hour resting there and then bring back another truck that is coming from Jaipur to Delhi. In total, he may be on the roads for a maximum of ten hours and then return back home,” said Garg. The journey from Jaipur to a next stop is under a second driver and so on.
Garg explains that Rivigo follows this concept of pitstops which is kind of a meet and greet place for truck drivers and where one driver hands over the truck to another for further journey. There are about seventy pitstops across the country. Drivers end up living closer to the seventy pitstops, mostly at the outskirts of a city or in rural areas, leading to a low cost of living. Garg said on an average a truck driver earns Rs 24,000 every month, calculated on the basis of hours on the job.
A fundamental change is happening in the lives of these eight thousand drivers, claims Garg. “A driver now looks healthy, shaves every morning and steps out in uniform. He is more responsible towards his family and the family does not want him to leave this company”. He facilitated drivers secure a health policy that provides coverage of Rs 500,000 for the driver’s family at a monthly expense of Rs 250. “Medical expenses, deliveries in the family used to cripple a driver’s finances”, he added.
Rivigo used technology to roster duty at pitstops, schedule pick-ups and deliveries and bring unscheduled stops and fuel theft to an end. “There are multiple things...If all of these come together the network can work successfully. We did not have a parallel anywhere else that we could replicate. The situation here is unique”, said Garg. The firm follows a system of incentive and penalty to encourage drivers to follow the processes. “We are also in a learning phase, we keep improving the processes. There is a need to make sure that pilots understand the philosophy. It has to be a combination of company’s system and driver’s intention”.
Country’s largest car maker Maruti Suzuki, which used Rivigo’s services, has a positive feedback. “Rivigo ferry our after sales spare parts and in-house production parts. Its approach to bringing down driver fatigue and overall driver safety is quite satisfying. With the relay driver system in place the trucks can operate up to 22 hours a day and their turnaround time is better,” said a company spokesperson.
Business is expanding and Rivigo plans to add about two thousand trucks every year to the fleet. Sector experts like Rivigo's business model but think that scalability could be an issue as procuring trucks is very capital intensive. The company clocked Rs 4 billion in revenue during FY17 (up 170 per cent Y-o-Y) but losses multiplied from Rs 55 million to Rs 1.37 billion. Garg maintains that some parts of the business are profitable and the rising loss is on account of investment in expanding the network. He claims that by June 2018 the monthly revenue will be at Rs 2.5 billion and double to Rs 5 billion by December.
The company’s express cargo business is now covering over ten thousand pin codes and is expected to double to twenty thousand by year end. Rivigo also has a marketplace where it used technology to connect small fleet owners with the customers. The marketplace has thirty thousand operators with a total fleet of over hundred thousand trucks. “It saves time for both owners and customers and dealing is transparent”, said Garg.
Garg claims that the rate of freight is not the determinant for getting customers. “The reliability of transportation is very poor in our country. A vehicle can take three days to reach from Delhi to Mumbai and it can also take ten days. Our system builds reliability at a lower transit time. This helps a client’s market share, brings down inventory and working capital needs and expands efficiencies. Clients are now thinking of new business models as we enable them to cover the entire country in just three days”, said Garg.