New-Age Technology Like Generative AI Helps Shipsy Build Supply Chain Resilience, Says its Co-Founder Soham Chokshi

While eCommerce and logistics companies have focused on the speed of delivery, they are now increasingly zeroing down on cost optimisation as it can significantly impact their bottom line and profitability.

Soham Chokshi, the co-founder and CEO of Shipsy, a SaaS-based logistics management start-up, believes that reining in cost while managing logistics boils down to sweating the delivery assets and using them to their maximum capacity. It starts by deep diving into the logistics journey from the get-go, including how many vehicles the company needs to lease, the delivery workforce required during different times of the year and the prudent use of technology to map this capacity. The company can also consider its end customers’ preferences and traffic conditions.

Chokshi tells Outlook Start-Up  that artificial intelligence (AI) can help in determining how to arrange the weight and volume capacity in the best way possible across its fleet. Minimising the delivery distance by mapping the optimal sequence while attempting deliveries will reduce fuel costs.

Edited excerpts:

What last-mile logistical challenges continue in contemporary India, and how can technology improve the multimodal district visibility for all stakeholders? 

When it comes to last-mile connectivity, companies are constantly trying to expand their coverage pan-India. This is tough given India’s vastness and remoteness, especially when everyone is cost-conscious.

There are some innovations like pick up and drop off (PUDO), where we utilise the existing network of kirana stores to deliver to a defined location from where people can pick up the goods at their leisure. In addition to saving costs, route planning is easier for the end customer, especially in tier 2 and 3 towns.

We also leverage AI to dissect jumbled and confusing addresses in India by converting the natural language-based address to a machine-readable format and tagging it to a mapping engine.

How do you leverage technology to empower drivers who are at the heart of the logistics industry? 

Balancing this dynamic workforce with the customer experience and incentivising the drivers is vital. Data technology can tell if a driver is performing well and putting in more effort so that we can reward them. It can also be used to help them access their earnings faster, which can reduce the attrition rate prevalent in the industry.

How is Shipsy leveraging blockchain to enhance the sustainability of its business?  

We have done some pilots on the blockchain, though a lot of it is now around AI. We like to use open source and build our proprietary things on top of it so that the community evolves, which is where generative AI fits in.

How is ONDC likely to impact e-commerce since delivery is not centralised on the platform? 

ONDC’s larger purpose is to see how to resolve the demand issue for smaller businesses without them having to pay hefty commissions to the marketplaces. However, it ultimately boils down to the delivery of the physical product.

In other marketplaces, if a customer receives a damaged product, they can return it and get a refund, which is a seamless way of operations. There are opportunities on ONDC, but many things need to be figured out.

What opportunities does this open for logistics start-ups like Shipsy?

Logistics start-ups need to get empanelled on the platform so that the merchants can select them as a means of delivery. This provides opportunities for companies like Shipsy to become ONDC compliant and have the relevant APIs in place. For a logistics company, the core is not building out all of these APIs and complex text tracks and that’s where we come in.

The rise of cross-border e-commerce has created several challenges for logistics start-ups, including handling issues of cross-border deliveries, state duties, regulations, language barriers, and different payment methods. Will ONDC compound it? 

There are challenges, of course. While consumers want convenience, they might now be willing to pay for it. Many companies have been offering cross-border logistics but interacting directly with the seller requires a lot more like building blocks for payments and delivery. While all the independent technology blocks are there, it remains to be seen how it will come together to provide a seamless customer experience at a justified cost.

After setting up your first Middle East headquarters in Dubai in 2021, Shipsy opened another one in Riyadh. You also signed an MoU with Monsha’at in the Middle East with plans to invest around $10 million in the region. Why is your company so focused on the Middle Eastern market?

India has been our core focus area, contributing a large chunk of our revenue. However, from a global expansion perspective, the Middle East and Southeast Asia are attractive markets with growing consumption. The landscape and structures of India and these regions are similar, as are the need and dynamics of the last mile logistics.

What is your current customer base and your customer retention rate? 

We have over 200 customers now, and this base is growing at around 30 per cent y-o-y. Our revenues have been growing by 100 per cent y-o-y and our net revenue retention average is 130 per cent y-o-y.

We are proud that almost all our customers and partners have been with us since we started in 2016. While smaller accounts do churn, our net revenue retention is higher than the industry standards.

With the ongoing funding winter, how is Shipsy becoming more capital efficient by reducing its burn? 

Shipsy raised $25 million earlier in 2022 from A91 Partners and Z3 Partners, along with existing investors Info Edge and Sequoia Capital India’s Surge. This took our overall funding close to $33 million.

We’ve always been capital efficient and until FY22, every year was profitable at the company level. Fundamentally, we have grown sustainably with healthy cash flows and a growing customer base.

In India, we have operations in Gurugram, Bengaluru and Mumbai, and globally, we have offices in Dubai, Riyadh and Jakarta. We do have overheads of managing these offices and a workforce of 250 staffers.

However, since we are a software company, our capital burn is lower as we are technology-enabled. We leverage tools like generative AI to make our employees 10X more productive.

Will the National Logistics Policy help India’s logistics network and companies like Shipsy to attract investment? 

The government’s initiatives unify prevalent technology systems, making it easier for companies like Shipsy to build user-facing applications on top of a unified data layer. Similarly, it is easier for customers, be it manufacturing, retail or ecommerce companies, to tap into all these applications present on a single public digital infrastructure.

Today, automatic number plate reading validates the vehicle’s passage and helps in faster fleet movement. Another instance is how a vehicle’s FASTag gets scanned at every booth, so one can avoid investing in GPS modules. A company can trace the vehicle’s movement using the status updates from these tolls. So, this kind of public infrastructure creates value throughout the ecosystem.

I’m hopeful that there will be a lot of phenomenal progress in such initiatives in the next couple of years.

What’s the average number of containers that Shipsy tracks and the freights it procures monthly? 

We process four million shipments daily with over 50 million transactions. This is because a shipment undergoes multiple scans. These volumes are growing by around 25 per cent y-o-y, because we also keep acquiring new customers.

What is your current network with respect to shipping lines, third-party logistics companies or straight forwarders? How does Shipsy manage these moving parts to ensure supply chain resilience and give each stakeholder tangible value? 

It is essential to have an extensive integrated network in place to move between shipping lines, airlines, parcel delivery networks, etc. Shipsy has integrated over 300 parties, including over 160 parcel delivery companies, around 85 shipping lines and 80 airlines.

Our dedicated integration scheme has a bunch of different enterprise resource planning (ERP) and warehouse management systems as well as communication engines that encompass SMS, WhatsApp and e-mail. This multi-faceted approach helps in the seamless management of all the moving parts you have mentioned.