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FMCG industry has been at cutting edge of procurement, given their sheer size, items to be procured and emphasis on contract manufacturing.

But one area that was unchanged for decades was Transportation Service Procurement. Reasons were many- Transport, though crucial, accounts for less than 2% of costs. Transporters were not exactly tech savvy. The sector was (and remains!) unorganized, thus requiring working with multiple partners.

But in last 3-4 years, many of the ground realities have changed- favoring a Digital Revolution in Procurement.

Why now?

WebXpress has been closely working to digitize transportation since 2005, and has seen the sector evolve. First, transporters started deploying ERP systems to automate and integrate their internal operations. After shock of demonetization in 2016, cash-based operations became unviable and there was massive adoption of Netbanking, FASTag and Fuel cards. Payments became centralized. With launch of E-waybill and E-invoicing- it is now impossible to operate without digitization.

This has created a massive opportunity for Manufacturing and Retail companies to completely digitize Procure to Payment cycle for Transportation.

Background

Our customer is one of India\'s largest FMCG companies most known for their Ayurved based products. They established leadership position in many segments in a short span and now have food products such as edible oil added to their portfolio.

They have a massive operation- spanning 6 plus manufacturing location, over 50 manufacturing partners and 35 plus depots. They ship material in over 1000 large trucks every day!!

In 2017, the company realized need for a focused approach to Transportation and hived off the same as a separate organization. This logistics organization also invested in their own fleet of over 1000 vehicles. But given the sheer demand and scale, they also worked with over 50 transport partners to procure vehicles from open market.

Need for Digitization

The procurement was manual- leading to delays, non-placement of vehicles, cartelization by transporters leading to higher rates and sometimes malpractices and favoritism.

WebXpress was already deployed as a Transportation Operations system digitizing the process post-procurement to delivery, customer invoicing, e-way bill management and payments.

WebXpress started working closely with a core team to solve the Procurement problem.

The solution

WebXpress created a Cloud based, Mobile enabled Procurement engine integrated with demand planning system. Thus, transport orders flow from ERP once vehicle demand is finalized based on manufacturing and distribution planning.

WebXpress then onboarded over 20,000 vendors across India- with KYC details- onto the Procurement platform. The vendors are mapped to "lanes" - that is their area of operations as not every vendor can serve every route.

Over 500 transport orders are automatically pushed to 500 plus vendors per lane- that is over 250,000 requests for placement- EVERY DAY. Vendors use a Mobile App or Portal to bid for a given Transport Order. Platform typically receives 100,000 responses and runs an algorithm to arrive at "Most Preferred" bid for each lane.

The winner is notified and asked to confirm vehicle details. The same is updated in Portal and then used to load the vehicle on arrival- thus reducing data entry to zero.

The procurement was manual- leading to delays, non-placement of vehicles, cartelization by transporters leading to higher rates and sometimes malpractices and favoritism.

Challenges faced- Exceptions

While, above process sounds great- this is India. We faced multiple challenges and situations. What if I want to close bid early? What if I am not happy with rate? What if a transporter backs out after winning bid? What if there is an operations issue and more vehicles are suddenly needed? What if exact size of vehicle is not available?

Each "if and but" was factored and features provided to manage these cases. For example, we created a "Force closure" option if Transport team felt they got required bids and do not want to wait till end of bidding window. We provided a "Re-bid" window, in case transport team felt better rates are possible.

While technology is doing the grunt work, the FINAL ARBITER of allocation is Operations team. However, any deviation needs to be approved and recorded ensuring full transparency.

Challenges faced- Technology

Initially, the transport vendor to lane mapping was limited to regional players. Then company realized that even for say Haridwar-Amritsar movement- someone from Chennai is offering to place a vehicle at a better rate!! Thus, platform was expanded to invite more vendors per bid- requiring huge scale up of cloud capacity.

Challenges faced- Adoption

It is one thing to make a digital system, and altogether different challenge to get an entire community of transporters to use the same. Equally challenging was for procurement team to work through digital system.

To their credit, our customer created a \"War Room\" to ensure any issues faced was resolved immediately. Transport vendors were trained, explained and when needed cajoled to adopt the system. IT team was beefed up to answer queries and Cloud investment was increased as needed.

It took almost six months for adoption to become significant. But then, there was no looking back.

Benefits

3X scale, same team: One of the biggest benefits was when company scaled its operation 3X- there was system available to simply replicate the process at all new locations and in new company. Today, company is procuring 300% more vehicles with same team and same investment.

Transparency: Every order, every bid, every placement is available for all concerned to see. Auditors can check rates. Finance can check trend rates. Sales can check placement ratio.

Saving: As a Digital Platform, each bid is able to reach 10 times more number of vendors resulting in optimum price discovery. Company typically saves 8-10% of costs as compared a similar non-digital operation of other companies in the region.

Placement speed: Before digitization, it took anywhere from 24 to 72 hours to finalize vendors and place vehicles. This is now reduced to 4 hours to finalized and 8 hours to place a vehicle. Thus, team can now plan "Late" in distribution cycle - resulting in better load factor for vehicles.

Future

The next step is to use Machine Learning on top of massive data and create AI based models to "Predict" prices. The AI tool will learn from past placements, successful delivery, seasonality, diesel prices, and arrive at possible saving. Same will be set as a "reserve price"- and vendors will need to better the same. This can potentially result in further saving of 4-5%, and improvement in service levels.