Relay trucking drives in 

The scene: A dhaba on a dusty highway somewhere in Rajasthan. A brightly painted truck pulls up to join the many others parked there, and the driver and cleaner clamber out. Even as they enter the dhaba, two other men head to the truck, open the fuel tank, and check the fuel level using a dipstick. Their job is to check that no fuel has been siphoned off en route. It’s important; one of the big expenses for truck - ing firms is fuel, and industry estimates suggest that up to 8% of diesel gets stolen from trucks on the road.

Deepak Garg and Gazal Kalra were convinced there was a better way of checking. The two had worked at consulting firm McKinsey before quitting to set up Rivigo, a Gurugram-based technology-driven logistics company in 2014. Like others in the industry, they used the dipstick test as well, but were sure there was a better way. There are fuel sensors, sure, but those are for electronic engines; the trucks here still run on old mechanical engines. (Electronic engines allow precise metering and delivery of fuel into the combustion chamber of diesel engines.)

“We looked at nearly 30 different sensors and then built our own which worked better for the Indian scenario. We trained the algorithm to identify pilferages in the network,” says Garg, chief executive, Rivigo. Today, all Rivigo trucks come with sensors that provide alerts in case of anomalies, and also generate daily reports to reveal fuel thefts, if any. Even before a driver takes out a truck, Rivigo can tell the mileage he will have based on his historical driving data. The data that the algorithm captures help drivers improve mileage.

Sounds like a pretty good deal, and you’d think savings on fuel alone should keep Rivigo afloat. But that’s not the only thing this three-year-old startup has done to disrupt trucking in India.

Go back, if you will, to where we began, to that highway dhaba. Now picture this. The driver and cleaner leap out and enter the dhaba. Two others come out, get into the truck, and drive away. No alarms are sounded, and the original drivers enjoy a nap. That’s the relay driver system at work.

A driver (or pilot, in Rivigo lingo) sets off on a 250 km journey from his home pit stop and hands over the truck to another driver at the next pit stop, pretty much like a baton in a relay race. There is a mandatory rest period for drivers at pit stops. The driver then drives a truck back to his home station. This essentially makes trucking a regular job that brings the driver back home daily. Rivigo has spent nearly Rs 200 crore on setting up a relay network of over 70 pit stops across the country.

The idea of relay teams in transportation is hardly new. In the early 1300s, King Edward I of England instituted a system of posting houses, where couriers carrying messages could get a change of horses. This allowed them to travel for long distances without the horses being exhausted. That lasted till the mid-1800s, when posting houses offered changes of horses to mail coaches which carried letters, packages, and people across the country.

With the advent of motorised transport and engines that could go on for long hours, the need for horses vanished. Instead, drivers put in long hours, often forced to drive nonstop, putting himself and others on the road at risk.

Over time, legislation was put in place, setting down how many hours a driver can be on the road. Much of this is not followed, of course, leading to accidents. Drivers have health and social issues, since they are hardly at home.

Globally (and India is no exception) truckers are among the most vulnerable section when it comes to sexually transmitted diseases.

Typically, long-haul truck drivers are away from home sometimes up to 10 days a trip. Almost one-fourth of them don’t get married, several of them have AIDS, and often end up being treated as outsiders in their own communities. Of course, there’s a lot about the camaraderie of the road, but that’s of little use when a driver gets home and doesn’t know what to do till the next trip.

At a local dhaba in Noida, we meet Rakesh, 21, a driver who works with a fleet based in Bikaner, Rajasthan. He’s been driving trucks for seven years, starting as a co-driver cleaning the vehicle. He earns Rs 15,000 a month, and goes home once every three days. “There is nothing else I can do,” he says, when we ask if he dreams of giving up driving for a job with more regular hours.

While Rivigo doesn’t see itself as performing social service, the fact that it offers regular hours (and regular salaries) to drivers makes it more than just another business. The average Rivigo pilot has an employment contract with the company, and earns between Rs 22,000 and Rs 26,000 a month. Incentives are added to this, as is insurance. “When people ask me, I tell them that I work for a company. There is a degree of respect that comes in being associated with a firm,” says Ram Krishan, a truck driver who has been working with Rivigo for over two years. There’s no price that can be put on that kind of pride.

While drivers are the backbone of any transportation company, Rivigo focusses almost as much on technology. Fuel sensors are just a part of this. The driver relay system, which looks perfectly simple, is actually a complicated logistical exercise. It is backed by sophisticated automation processes, analytics, algorithms, and data science, which match vehicles and pilots, ensuring that there are no breakages in the process. If a breakage happens— whether because of a vehicle accident or breakdown or a driver not turning up—it is handled immediately; disruptions can affect the whole delivery chain.

Each truck is equipped with sensors for location tracking and engine monitoring. Trucks and drivers are auto-allocated on trips based on availability and past performance on similar trips. In simple terms, Rivigo has envisaged the truck as an Internet of Things platform with smart sensors that constantly interact with a responsive logistics network.

The driver, meanwhile, is given a smartphone so he can track his upcoming trips, vehicle details, travel reports, QR codes for trips, details of the handover driver, among others.

“Most companies have a reactive approach to technology. For Rivigo, it’s proactive. They are doing tech advancement at a scale that doesn’t exist today. From driver education to unit optimisation and quality monitoring, they are a forward looking firm,” says Deepak Gaur, managing director, SAIF Partners, an investor in the firm.

Balancing technology and human needs has become a fine art for Rivigo. It’s this combination that helps it decide how many drivers are needed at every pitstop. If there are too many, their driving hours come down and they end up with too much free time on their hands. If there are too few, then driver fatigue goes up and they get less time for themselves and their families.

The emphasis on drivers and technology is already showing results. While the average distance recorded by the industry is about 15 km per hour, Rivigo says its trucks clock 50 km at least. And this makes solid business sense to Rivigo’s clients. The driver relay model ensures a 50% to 70% reduction in transit time. A Rivigo truck can complete a Delhi-Guwahati or Delhi-Chennai trip in three days; the industry average is a week.

For customers, it means they can improve speed to market while cutting inventory costs and working capital. And because it knows the value it brings, Rivigo charges a premium, which customers seem happy to pay. In three years, the trucking firm has built up an impressive client list of 1,000 companies across pharma, dairy, frozen foods, confectionery, consumer goods, and white goods. In a three-year period, Rivigo’s revenues have reached close to $200 million (Rs 1,263 crore).

It’s not all great going, of course. “Clients may need dedicated vehicles or aggregators or relay trucks, depending on their requirement, each specific to their industry and purpose. In order to optimise and save costs, a client may want to split expenses and opt for relay or part truck load (freight service). The issue with relay right now is that there is no assurance of full truck orders. It’s evolving and may take two or three years more to reach there,” says Mihir Mehta, chief executive, VS Logistics, a logistics company focussed on the consumer goods sector.

Over 60% of the total freight in India is transported by road. But the road transportation sector is hugely fragmented and unorganised. Close to 85% of the market is made up of small fleet owners who operate anything from 5 to 20 trucks. A report on the Indian logistics industry from investment advisory firm Avendus Capital adds that since most fleets are regional, 30% to 50% of forward truck loads return empty. That’s an inefficient use of trucks, to say nothing of the waste of fuel. The logistics sector in India is estimated to be worth $260 billion and has been growing at 14% in the last five years. India’s logistical costs to GDP ratio is 13%, a bit higher than the global average of 11.7%. The logistics industry is plagued with a host of issues including poor infrastructure, low average trucking speeds, congestion and bottlenecks in surface transportation, among others. Logistics costs tend to be high in India due to poor roads and worse vehicle quality, and high taxes and toll expenditures.

The Avendus report says India seems “sandwiched between growing demand for logistics services on the one end and a fragmented, unorganised logistics services market on the other. This presents a large, high-growth market opportunity for businesses that aim to organise the market and improve efficiencies. We believe that technology can play a significant role here.”

This leaves the field wide open for a company like Rivigo. “I think initially the question was if the company was slightly ahead of time. Most would not expect technology to disrupt logistics and actually make it work. But over time, with its transparency, speed and accountability, the company has shown the industry that disruption is possible in traditional businesses,” says Sanjeev Krishan, private equity and deals leader, PwC India.

Unlike the bulk of the industry, Rivigo owns 2,300 trucks, making it one of the largest fleet owners in the country. An assetheavy model is cause for concern, though Viraj Sawhney, managing director, Warburg Pincus, says he’s not so worried. Warburg Pincus is an investor in Rivigo, and has invested some $2 billion globally in the logistics sector. “The Indian transport market is very large, and a competitively priced and differentiated service provider like Rivigo should be able to continue to grow at a healthy pace by displacing unorganised players even if there is a slowdown tomorrow,” says Sawhney.

Of course, Rivigo is not going to have the road to itself. Any of the large road transport players can conceivably hire more drivers and set up pitstops (Aggarwal Packers has already done that, though it doesn’t follow the relay system). But, says Sawhney, competition could have trouble imitating Rivigo’s “culture of service orientation and transparency to the customer and using technology in the right way to solve a customer’s problems”. Also, unlike a new-age business like e-commerce, logistics is not a winner-take-all market. Competition and imitators will only help the market grow.

In logistics, execution is always complicated, and monitoring and managing a large distributed network efficiently while growing at a healthy pace is a big challenge. But Rivigo’s biggest challenge is something over which it has no control: drivers. According to industry estimates, there’s a 22% shortage of truck drivers in India. In 1982, there were 1,310 drivers per 1,000 vehicles. This fell to 750 in 2012. In 2022, it will be at 480 drivers. That’s a big reason for Rivigo’s focus on driver training and retention strategies.

Sawhney is hopeful that once the company has built credibility with customers and, more important, with truck owners and drivers, the drivers may see economic sense in bringing their own trucks to the Rivigo relay network. The startup currently has a non-relay platform which connects fleet owners to the demand. There are nearly 25,000 fleet owners on this platform. Garg is hopeful of offering a relay platform to these fleet owners in the future. “I call it relay-as-a-service, where other fleet owners and trucking companies will be able to relay through the platform.”

That could be an effective buffer in case of a slowdown. This is probably why Rivigo is so attractive to investors. In April 2015, SAIF Partners, along with other investors, had invested $9.6 million in a Series A round in TrucksFirst, as Rivigo was called then. In December 2015, SAIF and others invested $30 million in a Series B round. This included a small debt finance chunk. In November 2016, Warburg Pincus invested $75 million in the company for a minority stake. So far, the firm has raised a total of over $115 million from investors.

Now, the startup seems to have caught the attention of SoftBank. Rumours are rife that Rivigo will raise close to $250 million from SoftBank, giving it a valuation of $1 billion. When asked about this, Garg turns philosophical. “Our philosophy is to be like a river—keep flowing; either find your own way or make your own path but never stop.”

(The article was originally published in the special issue of the magazine in October 2017.)