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Myanmar: Shaking up the logistics industry by building a community of truck drivers
AIRBNB threatens the hospitality industry without owning a single hotel; Uber disrupts the taxi industry without owning a car. In Myanmar, Kargo, a logistics start-up, aims to shake up the highly-fragmented logistics industry without owning a single truck.
In an interview, George Oliver, the start-up’s chief business officer and Jamie Robinson, the chief financial officer, told The Myanmar Times how they seek to connect individuals and businesses with a driver community made of independent and commercial trucks through a bidding system.
“Our idea is to be a single-fleet service but our fleet is not ours, it’s a group of independent and company truck drivers – no one is in competition when it comes to the trucking side because anyone can bid in for prices.
“We’re trying to give access to the market for the small holder owners — the guy with only five or six trucks — who are not getting much business and don’t have access to do big jobs for big corporations, unless he’s going through several stages of brokerage. We want him to be able to determine his own market price,” he said.
He added that, with his system, truck drivers are able to maximise their efficiency and schedule their trips with clients ahead in time.
“Those guys [the truck drivers] are very reliable. Our best truck drivers are guys who own one or two trucks. They get it. They can see the value in it very quickly,” he said.
For small-medium businesses, it’s usually independent truck drivers or single truck driver-owners who handle the business, while for bigger international clients, it is the owners of 10 or more trucks, according to Mr Oliver.
Launched in September last year, Kargo already has 150-200 orders every month. The start-up focuses on B2B (business-to-business) at the moment, and mostly foreign companies.
“The main reason we’ve gone with the foreign firms is that they understand what we do very quickly because they’re already using it in India, China or Indonesia,” he said.
In December last year and January, the Yangon-based start-up formed a small group of business clients and started doing orders but most of the operations were done on a manual system. Then the team built the technology through that system.
“Training the drivers on the app is actually really easy because most Myanmartruck drivers have very nice phones and they’re on their phones all the time. So they’re very native of how the phone works,” Mr Oliver explained.
He took pride in building the technology in-house.
“The app, the booking platform and B2B dashboard are all built in Myanmar. Our whole technology team are Burmese [in Myanmar].
“This technology [logistics solution] exists in other countries but the challenge is to build one specifically for the Myanmar market,” he said.
Kargo charges clients a small commission, which serves as the start-up’s main revenue.
Is Kargo the “Uber for goods”, with trucks replacing cars? Not quite so.
“We don’t like using that word [Uber], and it’s not accurate because we’re not on demand,” Mr Oliver said. That is the first major difference.
The second difference is that Uber is a fixed-price model, whereas Kargo uses a bidding system. Its platform is based on a bidding platform where drivers using the app can bid prices for their services of transporting cargo. Mr Oliver called it a “self-determined market”.
“Uber is a fixed-price model, but the way that we are operating with the bidding system is that the drivers themselves determine what the price is and they get 100pc of whatever job they win – a fixed-price model versus a self-determined market.
“The bidding model essentially means that the prices will even out,” he added.
This system provides the transparency which many companies need.
“… clients, especially B2B clients, might have a relationship with certain drivers, who they’ve been working with for three months, and then they go in the next day and the price has gone up.
“We’re hoping that the model, through transparency, allows drivers to understand what a reasonable fare is which will then provide clients with a more regular understanding of what pricing should be.
“It also gives transparency to the company side. Because they [truck drivers] collect all the data and we give the data feed on their management dashboards.
“And so they can see why they are using that trucking supplier over another or why that other driver is winning bids.
“It gives the chief operating officer and the management team transparency over where the money is going to whom and why,” he said.
Hence, rather than displacing existing logistics firms, the start-up seeks to link up the fragmented drivers community with big and small businesses.
“Any logistics company has the opportunity to come onto the application and bid for jobs as well, because our product is our drivers and truckers. Without them, we’re pointless.
“Essentially, what we are trying to do is not to replace that chain [the logistics chain], but instead to lay a kind of blanket over that infrastructure which is going to provide transparency and efficiency,” Mr Robinson added.
Kargo faces two major challenges: the lack of qualified developers and absence of a widely used online payment platform. For Mr Oliver, finding the right app developer was very challenging.
“It was very hard. He [Kyaw Kyaw, the developer] spends a lot of his time training a group of developers to essentially replace his workload. But it’s very heavy on Kyaw Kyaw and the other two developers – it’s a lot of work,” Mr Oliver said, adding that the company plans to send junior developers to Vietnam or the Philippines to receive training.
“The problem at the moment is that our senior technology team is very good. But if they spend 90 percent of their day training-up a local group, then stuff gets late. He [Kyaw Kyaw] needs to spend most of his time on the system pushing out new products, new features and making sure things do not blow up – that is a constant fight.
“Now we’re working out exactly how we scale because we now have a driver app working in beta testing with a small group of drivers,” he said.
The absence of an online payment platform hinders the development of B2C (business-to-consumer).
“The easy thing about B2B is that you’re dealing with a small group of clients and really focus on delivering quality with a large group of drivers and payment works.
“But with B2C, there isn’t an efficient way for us to receive payment yet – it’s cash on delivery at the moment and no commission on either side,” he said, adding that the B2C side has to wait until online payment has taken off in the country. He reckoned that might mean either six months or up to two years.
The logistics start-up is aiming to launch the B2C app later this year and expand their B2B reach to local Myanmar companies. The latter goal is gathering steam: Kargo has recently started working with their first big Myanmar client.
Their endgame, though, lies beyond the individual consumers and businesses in the bustling cities of Mandalay and Yangon. Mr Oliver said he would like to provide farmers in rural Myanmar access to logistics services directly.
“Our endgame would be to giving the farmer in a field access to logistics directly, so he and his fellow cohorts could book a truck and get their goods to the market without having to go through three different layers of brokerage and trading.
“The farmer would have control over his own logistics for the right price, which is also transparent,” he said, conceding that even when Kargo has a network strong enough to reach out to the farmers, his aspiration relies on the country’s rural infrastructure moving ahead.
Source: http://www.mmtimes.com/index.php/business/26643-shaking-up-the-logistics-industry-by-building-a-community-of-truck-drivers.html