Within the supply chain ecosystem, stakeholders seek to improve their profit margins by channeling efficiency into operations. For logistics businesses, efficiency is a never-ending quest – a trait essential to keeping their customers happy, and their market share steady.
Locus, an Indian logistics technology startup, looks to optimize supply chain operations at-large, through a suite of artificial intelligence, or AI-based solutions that help businesses automate all their human-driven decisions required to move either a package or a person from point A to point B. Calling Locus an “algorithmic supply chain officer,” Locus co-founder and CEO Nishith Rastogi summarized that Locus can help companies improve their efficiency and consistency while also having more transparency into their operations.
Rastogi spoke about how retailers and ecommerce companies traditionally used the hub-and-spoke model, wherein goods were received at a single warehouse from where parcels would be dispatched directly to their destinations.
“But that is inefficient because today people want things to be delivered the same day, unlike before when even a week’s time for delivery was considered okay. A lot of the full truckload movement is now becoming less than truckload if it’s about using fixed routes. This is why we need algorithmic truck route optimization,” Rastogi said.
Automating truck routing is essential because it accounts for a variety of factors that dynamically change over time, making it virtually impossible for a human to optimize manually. For instance, computer-aided route automation can account for variables like the number of packages to be delivered, the number of trucks needed and their dimensions, the drivers to be sent out, and even parameters like the number of loading bays in the warehouse in question.
Locus is envisioned as a decision-making layer that sits atop all the information management systems like fleet management, driver management and vehicle management. “We take care of the decision-making that happens on top of this, effectively answering the question ‘where the truck should be’ over ‘where the truck is,’” said Rastogi.
Rastogi contended that efficiency in logistics is not about saving the bottom line, but rather about increasing the top line. “This brings in a completely different mindset to growth. And as more and more consumer products get commoditized, it’s effectively the distribution network that becomes the competitive mode for fast-moving consumer goods (FMCG) companies,” he said.
“Traditionally, if you take a brand like Kellogg’s – large chain retailers were always their biggest allies, because the brand was creating the product and the retailers were selling it. But today, because of profit margin pressures, retailers are actually pushing down their own products. So for the first time in the history of retail, retailers and brands have become competitors. That’s why brands are super interested in getting close to the customers themselves.”
Locus now counts about 40 customers, of which 10 are large enterprise companies like Big Basket, with the rest spread between small to medium enterprises and other startups.
“Our customers are from industries where the cost of logistics upon their profit margins is an important ratio. Because otherwise, if I’m fixing logistics cost for the jewelry market, they wouldn’t care as compared to the cost of their goods or profit margins, logistics costs amount to nothing,” said Rastogi. “This leads us to four interesting segments – e-commerce and retail, consumer packaged goods (CPG) and B2B distribution, third-party logistics, and field force movement where people go to the store to collect retail orders.”
Locus raised Series B funding of $22 million in May, in a round led by Falcon Edge Capital and Tiger Global, with existing investors Exfinity Venture Partners and Blume Ventures reinvesting in the round. Rastogi mentioned that the company already was profitable on a per transaction level, and that the funding would be directed at growing into international markets with a special focus on North America and Europe, and in attracting and retaining its talent pool.
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Kal Murthy
This is an interesting perspective both the reporter and speaker brought in to this article as I myself, a resident of Texas, had noticed it in big retailers who now became more active in lining up their own products on par with the established brands. But one thing I noticed is that the in-house products are cheaper than its branded counterparts, which makes me think that the profit margins remain pretty much the same; in other words, regardless of the origin, in-house or branded, I don’t think there will be a significant difference in profit margin.