Despite the myriads of challenges confronting the logistics industry, the market is still valued at $80billion with lots of possibilities to scale further, Obi Ozor, the Founder of Kobo360 speaks with Justice Godfrey Okamgba on how technology and strategic partnerships could serve as catalyst to developing the fragmented industry.
Your company is just a year in the logistics market; give us a run through of what you do
Kobo360 is just about a year. We started with beta testing, trying to understand the complex industry. Logistics requires technology and infrastructure. Regarding technology, there is basically little or no technology in Africa. For instance, there is no pricing, no payment, dynamic insurance, and other key innovations, it is very inefficient.
What impact has Kobo360 made in the area of technology disruption?
Kobo is using technology to tackle the issue of pricing. We have removed the opaque pricing, as there is too much of bargaining back and forth.
We have been able to nip this challenge in the bud using our proprietary algorithm known as Hedge logistics, and it’s on our new KoboApp which was made available to the public on 24th October.
KoboApp is on track to aggregate more than 250,000 trucks across West Africa by end of 2018.
You are one of those players that affirmed that the industry is valued at $80bn, how can you prove that?
Yes, the trucking industry across our continent is estimated at $84 billion. From experience, Kobo has worked with some principal players in the sector like Chisco, Dangote, Nigeria Railway, Maersk Line, Nestle, Lafarge, and partners in Kenya, and Ghana. So, we understand the enormous size of the market. About 90 million trucks movements annually, and the average trip revenue is about $923.
Aside from problems of infrastructure, which other areas require speedy technology intervention in the logistics industry?
Operational efficiency is an area that I think needs technological intervention. A lot of people in the freight space are going out of business because of mismanagement of fleet. It is not easy to manage two trucks and drivers, let alone 80 trucks and drivers especially when most people in logistics do not have the skill set to run logistics company professionally.
There is another problem in efficient dispatch system. Most trucks can find goods on forward movement, but find it almost impossible to find goods on reverse. KoboApp uses big data to aggregate all demands across Nigeria and dispatch drivers forward and reverse.
Logistics cost in Africa is about 150 percent because operators assume that there will be no reverse logistics. Customers are overcharged by at least 50 percent. But KoboApp is solving this problem as it dispatches about 72 percent of trucks with both forward and reverse logistics, thereby saving customers at least 30 percent which is ploughed back to grow their businesses.
What Problem is the Kobo360App Solves?
Supply is one of the most critical problems in the logistics industry due to the shortage of trucks. The cost of a truck is N52 million and that makes it difficult for any investor to finance that because it’s quite exorbitant.
Aside from the likes of Dangote, a prominent manufacturer, who owns more than 7,000 trucks, other companies just don’t have the capital to purchase such fleet or have the human resources to run the operations. This is like setting up a big company of more than 14,000 staff.
Many manufactures would rather invest the $1 billion into the business to increase capacity while they rely on KoboApp to access hundreds of thousands of trucks on the platform. We have seen industry titans embrace the KoboApp to increase logistics capacity: Lafarge, Dangote, Nestle, PZ Cussons, Flour Mills, and others.
The average truck should run 12 trips per month, but in Nigeria, truckers only run 4 trips. Truckers always wait to receive a call or return empty due to limited reverse logistics. However, the whole idea is that all the truckers could make at least 8 trips in a month with the KoboApp.
With this, they can increase profit by more than 200 percent. For instance, if a trucker goes on a trip to Kano, and couldn’t find reverse logistics from his personal business network, he can just open his easy to use KoboApp and will get reverse trip in seconds.
The customer gets their goods moved fast, safely, and at an affordable rate. The driver doubles his profit. Less trucks pack on the roadside waiting of trips and causing traffic. So, it’s a 3X benefit impacting the driver, customer, and the public. This is the problem, we are solving.
When was the KoboApp Launched?
We launched the App on the 24th of October, 2017.
We are gaining traction, at least for the fact that people don’t need to call a hundred people to find out if the truck is available, is a problem solved.
There are firms in the FMCG space that need 516 trucks per day, before now only 23 percent of those demands were met, but they have been able to access 58 percent of their daily demand during our beta testing. We hope to improve to 100 percent in the coming months.
As for the truckers, they are now making more money because they don’t get stuck anymore waiting for reverse logistics. As a trucker is going on a trip, there is reverse logistics. Even if they don’t, once they get to their destination, within 4 hours they get reverse logistics.
What are some of the features of the newly launched KoboApp?
The KoboApp has about ten distinctive features that would help simplify and ease off logistics issues in Africa.
The KoboApp will help aggregate supply and ease the stress of calling different truckers who might eventually end up disappointing both you and your customers. It is quite simple; all you need to do is to use the KoboApp and request trips on demand or scheduled.
The same thing applies to demand. You can also aggregate demand using the KoboApp; you get forward and reverse logistics.
There is also another key feature on the KoboApp called the KoboPAY which allows you to get paid once your logistics service originates from KoboApp. You do not need to wait for weeks or months to be settled by the customer.
Auto Parts Financing is another feature of the KoboApp. We extend up to N2million on loan to help drivers get their trucks back on the road and making millions monthly.
We have other features such as chat and analytics, bidding, KoboPASS and KoboVALUE.
It appears to me that the Logistics Industry hasn’t fully utilized its Potentials and what could be done to Salvage this Situation?
First, there is need to drive efficiency by increasing utilization of existing capacity. We are working with fleet owners to increase utilization from 36 percent to about 85 percent, then we can start finding innovative ways to attract new investments in the space – vehicle financing.
Even the waterways, is not being utilized. If goods get to Apapa, what is the need to move them on the roads when the roads are not even motorable? If we are moving goods to the east, we can leverage the waterways to Port Harcourt and engage trucks on short hauls. The rails still operate on a single track; we have less than 15 functional loco engines and 200 wagons. It is imperative we start thinking of using the waterways as it is cheaper and faster.
When I travelled with one of my partners to Kano via the passenger train, we were on the train for about 53 hours, why does it take so long to get to Kano. If it’s by air, its less than 2 hours, by road is 22 hours.
If it is a cargo train, it will take two weeks, which is after a company has been on the waitlist for months. So, Flour Mills, for instance, wouldn’t wait for one month before the rail delivers its containers. So, it will have to engage more than 50 trailers and spend more money.
As technology comes in, it helps infrastructure. If we are able to manage all the logistics channels, the water, road, and rail effectively in an App. It would remove the stress on the roads. Instead of having 25 trucks running at the same time, they can go on one train. Instead of having 200 containers going to the east by road, they can go on a barge. Addressing these challenges is very pivotal to the economic growth of Nigeria and Africa.
Logistics Providers have suffered the most with four Truck drivers passing while on the traffic jam in Apapa. A trip that usually takes three days is now two weeks triggering 60% loss in revenue and the industry-wide collapse of haulage companies. Is there any way this problem can be solved?
Kobo and Nigeria Port Authority are working on the implementation of a call-up system. The concerned stakeholders (NPA, Terminal Operators, and different unions) have met, and we plan to deploy solution soon.
The system uses a USSD code *735*1*TDO# to send entry code and schedule to the driver who is parked at our holding bay in Shagamu. Any law enforcement agency can stop any truck and confirm truckers’ entry code by dialling *735*4*CODE#
This solution is part of our general Road Crime Control System (RCCS) to Ministry of Transport to curb road crimes, kidnapping, and traffic. The minister inaugurated this last two weeks (Built by 2TOC solutions and Kobo).
The new KoboApp which allows people to request for trucks of any size from any place in Nigeria will further help ensure that truckers are not parking on roadsides waiting to get trips. They are dispatched on forward and reverse trips. This ensures that their revenue triple and commuters enjoy a free, less congested highway!
Technology cannot solve all the problems. We are still looking to partner with any responsible organization that can provide 100 acres of virgin land to be used as Holding Bay for trucks and empty containers.
So, the tech-driven USSD/Call up system in addition to 2000 Truck capacity Holding Bay and the 35km Apapa road under reconstruction by Dangote AG will cut traffic in Lagos by half by 2018.
Moving the Logistics Industry Forward is Critical, and Partnership Seems to Play a role in it, so what kind of Partnership are we Looking at?
There is need for collaboration in the sector; all the players need to come together because we are too fragmented. We need to get together and start thinking of ways we can use technology cum infrastructure to solve more problems in the sector. With the right technology, players do not even need to bother with the market. All they need is to execute because when we collaborate, there would always be demand.
The government is also an important player. You could have all the App and technology, but if there are no good roads, commerce can’t improve. The government needs to work on infrastructure. However, the private sector can partner with the government to make that happen. For instance, we have seen Dangote take on the Apapa road project.
As at June, it took about 27 hours for a truck to pick up a container from Apapa port and deliver to Ikorodu and back to return empty container at Apapa. Today, the issue has exacerbated, it takes about 5 days. But there is a business opportunity there, the money required to fix the Apapa roads are about $52 million. And we have seen startups in Nigeria raise that kind of money, it is not too much. There is nothing that stops Kobo from raising that sum to fix that road.
The government in this regard needs to be innovative because a daily collection of toll fees after construction is not bad at all. But there are lots of bureaucratic issues surrounding building of the roads in Nigeria, and that takes a whole lot of time.
A private sector player could act fast, fix the road within six months and build a toll. However, a strategic collaboration remains imperative in moving the industry forward.
Why do you say that the Logistics Market is so Fragmented?
This is an industry where someone who doesn’t have experience can operate. Someone could save up money, purchase a bike and give it out for deliveries. Such person in this kind of scenario doesn’t see it as a business but like a side hustle.
People start the business, start making money, increase capacities and get to a point where they need to start running it as a company but lack the infrastructure and competence to make it happen. KoboApp solves these problems.